Economy recovering (but still fragile)

European stocks rose with U.S. equity futures on speculation central banks will continue to support economic growth. Gold dropped to a two-month low.

Standard & Poor’s 500 Index (CME:SPU14) futures added 0.1% at 8:37 a.m. in New York, indicating the gauge may reach a record. The Stoxx Europe 600 Index advanced 0.5% to a three-week high. The Hang Seng Index lost 0.7% after a measure of Chinese manufacturing missed estimates. Gold (COMEX:GCQ14) dropped to the lowest price in more than two months and platinum had its longest run of losses since at least 1987.

Fed Chair Janet Yellen addresses global central bankers tomorrow. Minutes to the central banks’ July meeting released yesterday showed that officials will continue to support the economy amid uneven gains in the labor market. Data today showing a slowdown in euro-area manufacturing and services growth may increase pressure on the region’s central bank to boost stimulus. In China, the preliminary August reading of a purchasing managers index fell more than estimated.

“Markets are looking for some indication from Yellen as to what happens once quantitative easing stops,” Peter Dixon, a global equities economist at Commerzbank AG in London, said by phone. “I suspect she’ll say that it depends on the data. The U.S. economy is in reasonable shape. The task for central banks, and Yellen is at the forefront, is how to wean markets away from almost unlimited liquidity provisions when the economy is recovering but remains fragile.”
 

Record Watch
 

The S&P 500 rose 0.3% yesterday, closing within two points of a record. The benchmark index has rebounded 4% from a three-month low on Aug. 7 as investors speculated central banks won’t raise rates sooner than anticipated. It trades at 17.8 times the reported earnings of its companies, near the highest level since 2010.

A report today showed fewer Americans than forecast applied for unemployment benefits last week, a sign the U.S. job market is making progress as the world’s largest economy grows.

Euro-area manufacturing and services activity slowed in August, a preliminary report showed today. A purchasing managers’ index for both industries fell to 52.8 this month from 53.8 in July, Markit Economics said. Economists predicted a decline to 53.4, according to the median of 20 estimates in a Bloomberg News survey. Numbers above 50 indicate expansion.

European Central Bank President Mario Draghi said this month policy makers have intensified preparation to buy asset- backed securities. In June, the bank introduced targeted long- term refinancing operations to improve bank lending in the non- financial private sector.
 

Little Push
 

Three stocks climbed for every one that dropped on Europe’s Stoxx 600. Raiffeisen Bank International AG rallied the most since January after posting second-quarter net income that exceeded analysts’ projections. Nobel Biocare Holding AG advanced 4.2% after raising its 2014 profit-margin forecast. Royal Ahold NV slid 1.5% after reporting second-quarter earnings that missed estimates.

“The European economy is not falling off the rails but it could use a little bit of a push,” Ben Kumar, an investment manager who helps manage $7 billion at Seven Investment Management LLP in London, said by phone. “This leaves room for stimulus which is making investors more optimistic.”

The MSCI Emerging Markets Index slid 0.5%, falling for the first time in nine days. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 1%, its biggest drop in a week. The Shanghai Composite Index fell 0.4%.
 

China Data
 

The preliminary purchasing managers’ index from HSBC and Markit Economics was at 50.3 in August, missing the 51.5 median estimate of analysts. Numbers above 50 indicate expansion.

Gold for immediate delivery lost as much as 1% to $1,278.45 an ounce, its lowest price since June 19, according to Bloomberg generic pricing. Silver (COMEX:SIU14) retreated 0.4% to $19.4035 an ounce. Platinum dropped for a 10th day, falling 0.5% to $1,419.88 an ounce.

Copper (COMEX:HGQ14) for three-month delivery dropped 0.4% to $6,981 a metric ton in London, while nickel retreated 0.4% to $18,880 a ton and lead declined 0.5% to $2,247.50 a ton.

Russia’s Micex Index advanced for a 10th day, its longest rally since September 2005. The gauge advanced 1.2%, extending its rally this month to 6.1%. The ruble slipped less than 0.1% against the dollar and the hryvnia weakened for a third day, slipping 1.2%.

President Vladimir Putin will take part in an Aug. 26 meeting in Belarus attended by his Ukrainian counterpart Petro Poroshenko, the Russia government said Aug. 19.

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