Stocks Climb as Markets Show Resilience; Bonds Drop With Gold

European stocks climb to their highest this year, while bonds and gold fell, demonstrating markets’ increasing resilience to geopolitical shocks. The yen slid after the Bank of Japan maintained its stimulus plan.

The Stoxx Europe 600 Index was propelled higher by deal activity in media and credit-card services. Treasuries and gold reversed gains from Monday following a probable terror attack in Berlin and the killing of Russia’s envoy to Turkey. The yen approached the weakest since February versus the dollar after the central bank closed a tumultuous year for monetary policy by keeping its yield-curve and asset-purchase programs unchanged.

Markets have showed increasing immunity to terror incidents this year, with initial knee-jerk reactions to buy haven assets after attacks fading quickly. As trading volumes decrease before December holidays and year-end, investors may be loath to veer too far from the underlying market trends that have prevailed since the election of Donald Trump in November, namely favoring stocks and shunning bonds. A so-called fear gauge of volatility in European stocks was at the lowest since 2014.

“The market response to each new terror event is less and less pronounced,” said Mike van Dulken, head of research at Accendo Markets. The move in European stocks “confirms ever-thickening investor skin.”

Stocks

• The Stoxx Europe 600 Index rose 0.4 percent by 8:08 a.m. in London, set for the highest close in 2016. Analysts are upbeat about profit at its members next year, expecting earnings to grow 12.5 percent.
• Mediaset SpA jumped 22 percent to lead gains in the main gauge, after Vivendi SA said it plans to increase its stake in the Italian broadcaster owned by Silvio Berlusconi. Lloyds Banking Group Plc rose 2.7 percent after agreeing to buy Bank of America Corp.’s MBNA credit-card business in the U.K. for 1.9 billion pounds ($2.4 billion).
• S&P 500 Index futures gained 0.1 percent.

Currencies

• The Bloomberg Dollar Spot index gained for a second day, set for a rally of almost 8 percent this quarter, the biggest three-month advance since the third quarter of 2008.
• The euro plumbed another 2003 low against the dollar, after dropping 0.5 percent to $1.0352.
• The yen posted the steepest losses of 31 major currencies, dropping 0.9 percent to 118.16 per dollar.

Bonds

• Yields on 10-year Treasury notes were up three basis point to 2.57 percent after dropping five basis points on Monday.
• German bunds were little changed.

Commodities

• Gold slid as the dollar climbed and concerns eased over geopolitical events that had briefly supported the price. Bullion for immediate delivery was down 0.8 percent at $1,134.
• Oil rose 0.3 percent to $52.44 a barrel before government data forecast to show U.S. crude stockpiles fell for a fifth week, trimming an inventory glut.

Source – Bloomberg