Yen, euro jump as Europe bonds slide while U.S. stocks advance

Emerging Markets

The MSCI Emerging Markets Index fell 0.5% to six- month low. The Shanghai Composite Index slid 1.3% to a three-week low year as money-market rates jumped before a three- day holiday next week. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped for a seventh day, the longest losing streak in a year, as Brazil’s Ibovespa extended was little changed after closing yesterday at the lowest level since July.

The cost of insuring corporate bonds with credit-default swaps increased, with the Markit iTraxx Europe Index of contracts linked to 125 investment-grade companies rising 5 basis point to 113 basis points, the highest since April.

Oil, gold and corn added at least 0.9% percent to help lead gains in 14 of the 24 commodities tracked by the S&P GSCI Index, while natural gas, lead and copper slid at least 1.6%. Copper dropped for the first time in four days, falling 1.6% to $7,335 a metric ton.

Volatility

Price swings across assets and around the world are holding below historical averages even as central banks roil markets.

Levels of investor concern in equities, commodities, bonds and currencies as measured by Bank of America Corp.’s Market Risk index of cross-asset volatility are below readings from about 75% of days since 2000, according to data compiled by Bloomberg. Among those markets, the cost of options has risen in Treasuries and foreign exchange in 2013 and fallen in stocks and raw materials.

Daily fluctuations have widened in the past month amid speculation the Fed will curtail its quantitative easing program and reports on Chinese and American manufacturing that trailed estimates. The increases have done little to increase expectations for price swings to historical levels after volatility tumbled amid rallies that added $5 trillion to global equity values this year and pushed bond yields to record lows.

“We don’t expect a big increase in volatility because monetary policy is still generally too stimulative,” Joost van Leenders, who helps oversee $657 billion as a strategist at BNP Paribas Investment Partners in Amsterdam, said in a phone interview yesterday. Central-bank policy makers are “not going to remove quantitative easing quickly. They will do it gradually to see how markets react and if markets become too volatile, they will move more cautiously.”

www.bloomberg.com

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