(Bloomberg) -- Precious metals led commodities higher, boosting mining stocks, on speculation central banks in some of the world's leading economies will step up monetary stimulus in the wake of Britain's decision to leave the European Union.
Silver touched a two-year high and gold rallied for a fourth day after the Brexit vote spurred demand for havens. Brent crude held above $50 a barrel as Nigerian militants threatened more supply disruptions, while nickel climbed to an eight-month high after the Philippines announced plans to audit all mining operations. Miners in the Stoxx Europe 600 Index traded at the highest level since April, while automakers and builders led the industries lower. Currencies of commodity producers South Africa Australia, Canada and New Zealand were the best performers among major peers. The Shanghai Composite Index climbed the most since May.
Gold and other raw materials would benefit if the U.K.'s June 23 vote to leave the EU triggered further stimulus from the European Central Bank and Bank of Japan, as well as killing off speculation that the Federal Reserve will raise interest rates this year. Global equities last week rallied by the most in four months as policy makers worldwide sought to reassure investors they would take steps to limit the economic fallout of so-called Brexit and ensure financial markets kept functioning. The securities tumbled by the most since 2008 on the day after Britain's referendum.
“Investment demand for metals continue on expectations of a dovish Fed, growth worries and central bank policies putting more and more sovereign bonds into negative yields,” said Ole Hansen, head of commodity strategy at Denmark's Saxo Bank A/S by e-mail. “The policies of the ECB and BOJ are already ultra loose and further stimulus could be added following the Brexit vote.”
A BOJ report on Monday revealed the nation's companies cut their forecasts for inflation for five years' time, adding to pressure on the central bank to boost stimulus. In China, an official factory gauge retreated to the dividing line between improvement and deterioration last month, while a measure of services perked up, weekend data showed. Financial markets in the U.S. and Indonesia are shut for holidays. Some Middle Eastern markets will close this week for a religious holiday. Saudi Arabia is shut all week, while the U.A.E., Oman and Kuwait will close from Tuesday. Turkey will stop trading Monday afternoon and reopen on Friday.
Commodities
Silver soared as much as 7 percent, its biggest intraday gain since 2014, before paring its advance to 2 percent as it traded at $20.168 at 12:53 p.m. in London. Holdings in silver-backed exchange traded funds expanded to a record last month, and assets in gold ETFs are now at the highest since August 2013 as investors bet on a continued low-yield environment. Gold bullion rose 0.9 percent on Monday.
“Brexit has created all sorts of fear and loathing across markets,” Commonwealth Bank of Australia analysts, including Tobin Gorey, wrote in a July 4 note, adding that investors are cutting back on risk. “Gold and silver, as we would expect, benefit the most from safe-haven demand flows.”
Brent crude added 0.6 percent to $50.63 a barrel. A militant group operating in Nigeria's southern oil-producing region said it attacked five crude-pumping facilities, dealing a blow to the government's effort to enforce a cease-fire.
Nickel, which is used in the production of stainless steel, rose 3.3 percent to more than $10,000 a ton in London. It surged 5.6 percent on Friday after the Philippines announced its audit plans, threatening to curb supplies from the southeast Asian country. Less than a third of miners operating in the nation are compliant with international standards for responsible mining, according to the government.
Rubber futures climbed 3.7 percent in Tokyo, buoyed by shrinking stockpiles after rains disrupted production in Thailand.
Stocks
The Stoxx 600 slipped 0.4 percent, after posting is biggest four-day rally since February. The volume of shares changing hands was about 22 percent lower than the 30-day average, with the U.S. market closed for the Independence Day holiday. S&P 500 Index futures gained 0.2 percent.
Italy's FTSE MIB Index fell 1 percent, the biggest decline among western-European markets, as Banca Monte dei Paschi di Siena SpA and Banca Popolare dell'Emilia Romagna SC lost more than 4 percent. The ECB has asked Monte Paschi to draw up a plan for tackling its bad-loan burden, a sign the nation's banks are under pressure to bolster their finances.
The U.K.'s FTSE 100 Index was little changed. The gauge of megacaps is close to entering a bull market, boosted by a weaker pound and a rally in miners of precious metals. Fresnillo Plc and Randgold Resources Ltd. climbed more than 4 percent on Monday.
The MSCI Emerging Markets Index rose 0.5 percent to the highest since April. It is up 6.2 percent in five days, the best performance for the period since March 7.
The Shanghai Composite Index climbed 1.9 percent. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong rose for a third day, advancing 1 percent, headed for its highest close since June 10, as trading resuming after a holiday on Friday. India's benchmark rose 0.5 percent.
Currencies
The Australian, Canadian and New Zealand dollars and the South African rand appreciated at least 0.4 percent, buoyed by the pickup in commodity prices.
The British pound was little changed versus the dollar, after Chancellor of the Exchequer George Osborne floated the possibility of a lower corporate tax rate and before Bank of England Governor Mark Carney outlines the available macroprudential tools on Tuesday. The currency tumbled 8.1 percent in June, the most since 2008, as the U.K.'s decision to leave the EU shocked investors and triggered political upheaval in the country.
Japan's yen weakened 0.1 percent to 102.58 per dollar. It declined 0.3 percent last week as BOJ Governor Haruhiko Kuroda said more funds could be injected into the market should they be needed. The haven currency touched 99.02 in the wake of the vote for Brexit, its strongest level since 2014.
Bonds
European bonds fell after surging last week. Spanish 10-year yields climbed one basis point to 1.16 percent, after a 48 basis-point drop last week that was the biggest since 2012. The yield on similar-maturity Italian bonds added two basis points, to 1.25 percent.
The yield on Australia's 10-year government bonds increased by five basis points to 2 percent, after sinking to a record 1.95 percent in the last session. The nation's inconclusive vote raises the prospect Prime Minister Malcolm Turnbull's Liberal-National coalition -- or the main opposition Labor Party -- will be forced to work with a handful of disparate independent lawmakers in order to stay in power. Ballot counting doesn't resume until Tuesday.
“It looks like another three years of de facto minority government, which is not a great outcome for the economy and investment markets,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which manages more than $110 billion in Sydney.
The Reserve Bank of Australia is expected to leave interest rates unchanged at a policy review on Tuesday, according to all 27 economists surveyed by Bloomberg. Swaps indicate a better-than-even chance of an easing in August following the next inflation reading.
The cost of insuring corporate debt fell for a fifth day, according to data compiled by Bloomberg. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies declined one basis point to 79 basis points and the high-yield benchmark decreased six basis points to 343 basis points.
--With assistance from Adam Haigh Emma O'Brien Ranjeetha Pakiam Jonathan Burgos Stephen Kirkland David Goodman Cecile Vannucci Whitney McFerron James Herron and Abigail Moses To contact the reporters on this story: James Regan in Hong Kong at jregan19@bloomberg.net, Eddie van der Walt in London at evanderwalt@bloomberg.net. To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, James Regan at jregan19@bloomberg.net.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
