Pound Strengthens After Inflation Report; Stocks, U.S. Futures Fluctuate

The pound strengthened to the highest level in more than a year against the dollar after a surge in U.K. inflation. Stocks and U.S. index futures fluctuated while crude oil and wheat declined.
The pound gained 0.4 percent versus the greenback and the euro as of 11:51 a.m. in London. The yield on the two-year gilt jumped 9 basis points to the highest in more than a week. The MSCI World (MXWO) Index rose 0.6 percent to a one-week high and Standard & Poor’s 500 Index futures fell 0.1 percent. Copper advanced 0.6 percent, oil slipped 0.1 percent and wheat dropped 2.1 percent. The cost of default insurance on Japanese debt fell.
U.K. inflation accelerated more than economists forecast in February to double the Bank of England’s target, increasing pressure on policy makers to raise interest rates. In Japan, Tokyo Electric Power Co. tried to restore supply to the worst- affected parts of its crippled Fukushima Dai-Ichi nuclear plant, while Western allies expanded their air campaign over Libya to thwart Muammar Qaddafi’s forces.
“The pound’s rally was catalyzed by this morning’s higher- than-expected U.K. CPI figures which have once again changed market expectations for future interest-rate movements,” said Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Plc in London.
Britain’s currency strengthened to a 14-month high of $1.6381 and to 86.85 pence per euro, and the two-year gilt yield rose to 1.31 percent, the highest since March 11. Short-sterling futures fell, sending the implied yield on the contract expiring in December 11 basis points higher to 1.50 percent.

Kiwi Dollar

New Zealand’s dollar jumped 1.2 percent against its U.S. counterpart and strengthened 1.1 percent versus the yen. The kiwi was bolstered after the International Monetary Fund said the nation’s central bank may need to raise interest rates “relatively quickly.”
The Stoxx Europe 600 Index was little changed after three days of gains, while Spain’s IBEX 35 climbed 1.1 percent. S&P 500 futures were unchanged before a report from the Federal Housing Finance Agency at 10 a.m. New York time that may show U.S. home prices fell for a third month in January. The Federal Reserve Bank of Richmond will release its business activity index for March.
The Nikkei 225 (NKY) Stock Average jumped 4.4 percent after being closed yesterday, paring its post-earthquake loss to 7.9 percent. Tepco rose by its daily limit in Tokyo, extending a two-day gain to 38 percent. The cost of credit-default swaps protecting Japan’s government debt fell below 100 basis points for the first time in a week, dropping 6 basis points to 99, according to CMA.

‘Relieved’ About Japan

“Investors are a bit relieved regarding Japan,” said Bruno Ducros, a Paris-based fund manager at CamGestion, which oversees about $4.3 billion in stocks.
The MSCI Emerging-Markets Index rose for a third day, gaining 0.5 percent. India’s Sensitive Index, or Sensex, jumped 0.8 percent and benchmark indexes in South Korea and Taiwan advanced by 0.5 percent. Russia’s Micex Index slid 1.2 percent.
The yield on the 10-year Irish bond rose 10 basis points to 9.69 percent. The similar-maturity Greek yield jumped 10 basis points to 12.36 percent, while the German bund yield climbed 5 basis points to 3.28 percent.
Wheat declined 15 cents to $7.06 a bushel, after conditions for the winter crop improved in Kansas, the biggest U.S. grower. Gold was little changed at $1,426.95 an ounce, about 1 percent below the record high set on March 7. Copper jumped $47.50 to $9,445 a metric ton and oil fell to $102.25 a barrel.

Asian stocks rose for a third day, led by the