Global shares rally with crude

Stocks across the globe rallied, with the Standard & Poor’s 500 Index extending its best week of 2016, as oil and metals prices advanced. Treasuries, gold and the yen declined amid reduced demand for havens.
Raw-material and energy shares led equities higher, as investors scooped up the past year’s worst performers. The MSCI All Country World Index headed for the highest close since Feb. 1, as crude surpassed $31 a barrel and iron ore rose above $50 a metric ton. The pound weakened after London’s Conservative Mayor Boris Johnson said he’ll campaign for Britain’s exit from the European Union, opposing Prime Minister David Cameron. The weekend ouster of China’s chief market regulator sparked equity increases in Shanghai and Hong Kong.

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While Britain’s currency was roiled by the specter of an exit from the EU, stocks maintained momentum after their best week since October, as oil traders considered how much of a boost prices would get from an output freeze led by Russia and Saudi Arabia. Investors were also encouraged by the removal of Xiao Gang from the helm of the China Securities Regulatory Commission, as leaders seek to attribute responsibility for January’s market rout. The rebound in global equities from a two-and-a-half year low on Feb. 11 has retraced almost half the losses this year.
“This is a continued recovery from the big correction we’ve encountered,” said Eric Green, director of research and senior managing partner at Penn Capital, which has more than $6 billion under management in Philadelphia. “Earnings are coming in a little better than low expectations, valuations in the market have become attractive and sentiment is very, very negative. All those things along with the fact that you’re getting a bounce back in oil prices are contributing to the beginning of the upside.”

STOCKS
The S&P 500 rose 1.2% at 11:10 a.m. in New York, extending gains after posting the strongest weekly advance since November. Freeport-McMoRan Inc. and Alcoa Inc. jumped more than 11%. Data today also showed a measure of January manufacturing in the Chicago area improved more than expected.
The MSCI All Country index added 1.1%, while the Stoxx Europe 600 Index was 1.5% higher. BHP Billiton Ltd. and Rio Tinto Group jumped more than 8% for some of the biggest gains in Britain’s FTSE 100 Index.
The U.K. equities gauge added 1.5%. The FTSE 100 is the third best performing benchmark this year among 24 developed markets tracked by Bloomberg, helped by a weakening pound. HSBC Holdings Plc fell 1% after posting a quarterly loss, hurt by a decline in income from lending, higher loan-impairment charges and fair-value losses on its debt.
CURRENCIES
The pound weakened even after Cameron announced a deal winning welfare curbs on Friday, and a measure of traders’ expectations for price swings in the pound against the euro during the next six months remained at the highest since 2011. Cameron said on Saturday that he would fight to keep Britain in the EU, setting June 23 as the date for the referendum.
“Brexit will be one of the biggest events in 2016,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., said in an e-mail to clients. “Boris Johnson’s decision over the weekend to support the Brexit campaign has caused the pound to move wildly. He is widely believed to be the next leader of the Conservative Party and is highly popular — his position has a lot of influence.”
The yen slipped 0.3% to 112.98 per dollar. Japan’s currency remains the best performer this year among major peers, strengthening 6.2 % after anxiety over the global economic outlook and monetary policy rocked markets, burnishing its haven appeal. The euro dropped 0.9% to $1.1029 on Monday.
Russia’s ruble led gains in emerging market currencies, advancing 1.9%. Brazil’s real and South Africa’s rand also strengthened more than 1.4%.
COMMODITIES
West Texas Intermediate rose 6.2% to $31.49 a barrel, while Brent added 4.6% to $34.52.
A deal between Russia and Saudi Arabia will see oil production capped at levels that are still close to record highs. Iraq and Iran should have output capped at a higher level to allow the countries to gain lost market share due to war and sanctions, Nigerian Minister of State for Petroleum Resources Emmanuel Kachikwu told reporters in Doha on Sunday. Oil-producing nations agreed to wrap up talks on the freeze by the start of March, according to Russian Energy Minister Alexander Novak.
“Oil production cuts would be very difficult,” said Amrita Sen, chief oil analyst at consulting firm Energy Aspects Ltd. in London. “But OPEC has introduced enough uncertainty that speculators need to think twice about their bearish bets.”
Iron ore with 62% content rallied 6.2% to $51.52 a dry ton on Monday, the highest level since October, according to Metal Bulletin Ltd. The commodity has jumped 18% this year after plunging in December to the lowest in more than six years.
Copper on the London Metal Exchange joined the rally, gaining 1.4%, with zinc, nickel and lead all climbing.
Gold for immediate delivery slid 1.2% in a second day of losses to $1,212.12 an ounce.
EMERGING MARKETS
The MSCI Emerging Markets Index advanced 1.2% to breach its 50-day moving average after surging 4.2% last week. Benchmark gauges in Turkey and Poland gained more than 1.2%.
The Shanghai Composite Index climbed 2.4% to the highest in nearly a month amid speculation that the new head of China’s securities regulator will take measures to bolster the world’s second-largest equity market.
Liu Shiyu, previously chairman of Agricultural Bank of China Ltd. and deputy governor at the People’s Bank of China before that, takes over as chairman of the China Securities Regulatory Commission. He replaces Xiao Gang, who was removed from his post on Saturday in the wake of last summer’s $5 trillion rout that reverberated across global financial markets.
The Bloomberg GCC 200 Index of Gulf stocks advanced 1.2%, with shares in Abu Dhabi climbing more than 2%. Dubai’s DFM General Index rose 2.5%, bringing its rally from a Jan. 21 low to above the 20% threshold for a bull market.
BONDS
Treasuries fell amid reduced demand for the haven of fixed-income securities. U.S. 10-year note yields rose one basis point to 1.75%.
Signs of strains in the euro-area economy boosted speculation that the European Central Bank will respond with additional monetary stimulus next month, supporting government bonds in the region. Securities issued by the nation’s higher-deficit nations led gains as composite gauge of services and manufacturing slid to the lowest in more than a year.
Spain’s 10-year bond yield decreased four basis points to 1.65%. The yield on similar-maturity Italian bonds fell four basis points to 1.52%.
The cost of insuring European corporate debt fell, extending last week’s declines. The Markit iTraxx Europe Crossover Index of credit-default swaps on mostly high-yield companies fell as much as 22 basis points to 425 basis points, according to data compiled by Bloomberg.
The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 junk-rated companies, fell as much as 11 basis points to 540 basis points.