Pound Jumps 1% Against Euro as EU Inflation Slows; Gilts Decline

The pound jumped more than 1 percent against the euro, the biggest gain in six months, after euro-area inflation slowed and the jobless rate climbed to a record, boosting demand for alternatives to Europe’s shared currency.

Sterling advanced for a second day versus the euro as the reports spurred speculation the European Central Bank will cut interest rates as soon as its meeting next week to revive growth. The pound may extend gains, according to UBS AG. U.K. government bonds fell as an index of U.S. business activity expanded at the fastest pace since March 2011, damping investor appetite for safer assets.

The pound advanced 1.1 percent to 84.70 pence per euro at 4:42 p.m. London time, the biggest gain April 25. The rally came after the U.K. currency slipped to 85.85 pence on Oct. 29, the weakest since Aug. 29. Sterling was little changed at $1.6047.

The ECB will cut its refinancing rate by a quarter percentage point to 0.25 percent at its Nov. 7 meeting, according to a research note from UBS. BNP Paribas SA, JPMorgan Chase & Co. and Scotiabank also changed their ECB calls today and now predict officials will lower rates in December.

(Source: Bloomberg)

China’s Stocks Decline as Earnings Drag on Banks to Drugmakers

China’s stocks fell, heading for the first monthly loss since June, as consumer staple producers, drugmakers and banks declined. Property developers rallied.

Inner Mongolia Yili Industrial Group Co. slumped by the daily 10 percent limit and Guangzhou Baiyunshan Pharmaceutical Holdings Co. slid after the companies posted earnings. (SHCOMP) China Minsheng Banking Corp. fell 2.9 percent after net income trailed estimates. Poly Real Estate Group Co. led a gauge of property stocks to its biggest gain in three weeks after President Xi Jinping said China will accelerate building public housing.

The Shanghai Composite Index retreated 0.7 percent to 2,146.32 at 9:55 a.m. local time. The gauge has lost 1.3 percent in October. Earnings at the 252 companies in the measure tracked by Bloomberg that reported results so far this quarter have trailed analyst estimates by 6.1 percent.

“Earnings were generally worse than expected, which has dampened sentiment,” said Zeng Xianzhao, an analyst at Everbright Securities Co. in Chongqing.

The CSI 300 Index lost 1 percent to 2,384.41, while the Hang Seng China Enterprises Index (HSCEI) dropped 0.6 percent. The Bloomberg China-US Equity Index gained 0.5 percent in New York yesterday. The Shanghai index trades at 8.5 times projected profits for the next 12 months, lower than the seven-year average of 15.4.

The nation’s top four banks posted their biggest increase in soured loans since at least 2010. Nonperforming loans at Industrial & Commercial Bank of China Ltd. (1398), China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. rose 3.5 percent in the three months to Sept. 30 from June to a combined 329.4 billion yuan ($54 billion), according to data compiled by Bloomberg News.

China’s interest-rate swaps and benchmark money-market rate rose to four-month highs yesterday even after the central bank injected funds for the first time in almost two weeks Oct. 29.

(Source: Bloomberg)

Hong Kong Stocks Rise Third Day on Earnings, Fed Taper Outlook

Hong Kong stocks rose for a third day as earnings at China Petroleum & Chemical Corp. and Haitong Securities Co. improved and investors await the outcome of the Federal Reserve’s policy meeting concluding today.

China Petroleum, Asia’s largest refiner, climbed 2 percent after reporting yesterday a 20 percent jump in third-quarter net income, beating estimates. Haitong Securities added 1.1 percent as quarterly profit at the mainland’s No. 2 brokerage more than doubled. Chow Tai Fook Jewellery Group Ltd., the world’s largest listed jewelry chain, rose 1.3 percent after saying first-half profit probably increased on strong sales.

The Hang Seng Index (HSI) gained 0.6 percent to 22,983.59 as of 9:53 a.m. in Hong Kong, with almost six shares rising for each that fell. The Hang Seng China Enterprises Index (HSCEI) of mainland companies traded in the city added 0.7 percent to 10,460.02. The Fed will maintain its $85 billion in monthly bond-buying at the end of today’s meeting and may delay its first stimulus reduction until March, according to economists surveyed by Bloomberg.

The Hang Seng Index fell 0.1 percent this month through yesterday. Hong Kong’s benchmark equity gauge traded at 10.9 times estimated earnings yesterday, compared with 16 for the Standard & Poor’s 500 Index.

Futures on the S&P 500 were little changed today. The gauge yesterday added 0.6 percent to a record as earnings from Pfizer Inc. to Xylem Inc. beat estimates and data indicating slower growth fueled bets the Fed will maintain stimulus.

(Source: Bloomberg)