BS: Treasuries Rise, Stocks Fall on Economy; Copper, Won Weaken
Aug. 20 (Bloomberg) -- Treasuries rose, extending the longest weekly rally since February, and European stocks fell to a month low on speculation the U.S. economic recovery is faltering. South Korea’s won weakened, and copper declined.
The yield on 10-year Treasury note fell two basis points to 2.55, the lowest in 17 months. The Stoxx Europe 600 Index fell 0.6 percent at 10:22 a.m. in London. Futures on the Standard & Poor’s 500 Index slipped 0.1 percent after the U.S. benchmark gauge yesterday tumbled 1.7 percent. South Korea’s won depreciated against all 16 major currencies, and copper declined for a second day.
Revisions to U.S. economic growth next week will probably indicate the expansion slowed even more in the second quarter, to 1.4 percent from the 2.4 percent in a preliminary report on July 30, according to a Bloomberg survey. European Central Bank council member Axel Weber said the ECB shouldn’t withdraw stimulus before year-end. American jobless claims climbed more than economists estimated and a Philadelphia-area manufacturing index unexpectedly dropped, data showed yesterday.
For bonds, “the bull run is firmly in place,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “Data has continued to miss consensus by quite a lot, firmly underpinning fears of a double-dip recession.”
Treasury 10-year notes headed for a fourth weekly gain. The two-year yield dropped 2 basis points to a record-low 0.4628 percent. The 10-year yield fell faster than the two-year yield in a so-called bull flattening that narrowed the spread to 209 basis points, near the least in 16 months. The 30-year note yield dropped 3 basis points to 3.62 percent. St. Louis Federal Reserve President James Bullard said yesterday the Fed should buy more Treasuries if the weakening economy indicates slowing inflation. Bullard will speak today in Rogers, Arkansas.
German Bunds
German 10-year and 30-year bond yields both fell to record lows after Weber, who heads Germany’s Bundesbank, said the ECB is likely to continue to support banks through end-of-year liquidity tensions before determining in the first quarter when to withdraw emergency lending measures. The 10-year German yield fell as low as 2.297 percent, while the 30-year yield dropped two basis points to as low as 2.945 percent.
Five stocks fell for every one that gained on the Stoxx 600 index, while all 19 industry groups retreated. BP Plc declined for a fifth day, losing 1.3 percent as scientists said the company’s oil spill created an underwater plume of degrading crude more than 22 miles long that’s migrating across the Gulf of Mexico. European Aeronautic, Defence & Space Co. slipped 1.9 percent after Nomura Holdings Inc. cut its recommendation on the stock. Dana Petroleum led rising shares, gaining 5.6 percent after Korea National Oil Corp. made a hostile 1.87 billion-pound ($2.9 billion) bid for the U.K. explorer.
Emerging Markets
The Shanghai Composite Index lost 1.7 percent, the most since Aug. 10, as investors speculated inflation will delay monetary easing. The MSCI Emerging Markets Index sank 0.5 percent to 989.60, the first drop in six days. Korea depreciated for the first time in four days on concern a stalling U.S. recovery could hit exports.
U.S. futures fluctuated after the S&P 500 yesterday tumbled to its lowest level in a month. Dell Inc., the world’s third- largest personal-computer maker, fell 2.4 percent in Germany after reporting profitability that missed analysts’ estimates. Tyco International Ltd. will replace Smith International in the S&P 500 at the close of trading on Aug. 26 as Schlumberger Ltd. completes its purchase of the oil-services company, S&P said in a statement after the close of trading in New York yesterday.
Euro, Yen
The euro fell the most against the dollar in a week and dropped to the lowest level against the yen since July 1 after Weber’s comments. The single European currency was 0.5 percent lower at $1.2761, and 0.4 percent weaker at 109.06 yen. The yen was stronger against 13 of its 16 most-traded peers, rising most against the Korean won, by 0.8 percent.
All metals on the London Metal Exchange dropped, led by a 1.5 percent decline in nickel. Crude oil for September delivery fell 18 cents to $74.25 a barrel on the New York Mercantile Exchange. Refined sugar for October delivery gained 2.6 percent to $572.80 a ton on NYSE Liffe after the U.S. Department of Agriculture extended the window for extra sugar imports because of “increased tightness” in the raw sugar market.
The cost of insuring European banks’ riskiest debt rose. Credit-default swaps tied to the subordinated bonds of Spanish lender Banco de Sabadell SA climbed 30 basis points to 386 and contracts on Banco Popular Espanol SA, the nation’s third- biggest commercial bank, increased 27 basis points to 393, according to data provider CMA. Swaps on subordinated bonds issued by Allianz SE, Europe’s biggest insurer, rose 5 basis points to 87. The Markit iTraxx Financial Index of swaps on bank and insurance company subordinated debt climbed 3 basis points to a four-day high of 200, JPMorgan Chase & Co. prices show.
--With assistance from Matthew Brown, Claudia Carpenter, David Merritt, Abigail Moses and Jason Webb in London. Editors: Stephen Kirkland, Mark Gilbert.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: Paul Sillitoe in London at psillitoe@bloomberg.net
