BLBG:Dollar Climbs as European Stocks Fall Before Budget Talks
The dollar strengthened the most in a week and European stocks retreated as U.S. lawmakers prepared to debate tax increases and spending cuts that take effect next month. Italian bonds erased losses as the government sold debt.
The Dollar Index rose 0.4 percent at 10:35 a.m. in London. The Stoxx Europe 600 Index fell 0.3 percent and Standard & Poor’s 500 Index futures lost 0.2 percent. The yield on Italian 10-year bonds erased an earlier gain of as much as four basis points as demand increased at an auction.
U.S. congressional leaders plan to meet with President Barack Obama today and House Republicans said they will convene Dec. 30 as lawmakers seek to avoid more than $600 billion in spending cuts and tax gains that will start in January. A report may show pending sales of American homes rose for a third month. Japan’s industrial output declined more than economists expected in November, bolstering the case for Prime Minister Shinzo Abe to push for further monetary easing.
“Time is running out for the long-awaited solution in fiscal-cliff negotiations,” said Kai Fachinger, who manages about $700 million at SAM Sustainable Asset Management AG in Zurich. “As the positions of the two parties are just too far off, it’s likely to happen at the very last second. In a worst- case scenario, the negotiations will continue into early 2013 and stock markets will open very volatile into the new year.”
European Shares
The Stoxx 600 (SXXP)’s decline trimmed its 2012 advance to 15 percent, the largest annual increase since 2009. The number of shares changing hands today was 28 percent less than the 30-day average, according to data compiled by Bloomberg.
Bankia SA plunged 26 percent to the lowest price since its initial share sale in July 2011 as bank was temporarily excluded from Spain’s benchmark IBEX 35. Porsche SE surged 6.3 percent to the highest in almost two years after an appeals court ruling dismissed a lawsuit by hedge funds that accused the German carmaker of concealing a plan to corner the market in Volkswagen AG shares.
S&P 500 futures gained as much as 0.4 percent earlier today after Senator Dick Durbin said Obama will meet with Democratic and Republican leaders of the House and Senate. U.S. stocks yesterday pared losses to close little changed as House Republican leaders announced the Dec. 30 chamber meeting, its first Sunday session in more than two years.
Benchmark U.S. 10-year yields fell 2 basis points to 1.72 percent. Treasuries lagged behind stocks this year by the most since 2009, with equities returning eight times more than bonds.
Home Sales
A report at 10 a.m. New York time may show Americans signed more contracts in November to purchase previously owned homes. The index of pending home resales climbed 1 percent after a 5.2 percent gain in October, according to a Bloomberg survey of economists.
The MSCI Asia Pacific Index advanced 0.6 percent. Government reports today showed Japan’s industrial output slid 1.7 percent last month from October, worse than all 27 estimates in a Bloomberg News survey that had a median forecast of a 0.5 percent decline. Consumer prices excluding fresh food fell 0.1 percent in November from a year earlier.
Abe’s cabinet is working on a plan to fight against a strong yen, the Nikkei newspaper said. Proposals include the use of currency intervention when needed, the paper said.
The yield on Italian 10-year bonds was little changed at 4.52 percent as the country sold 5.9 billion euros ($7.8 billion) of five- and 10-year government securities. Investors bid for 1.47 times the amount of the 10-year debt offered, up from 1.18 times on Nov. 29.
Corporate Default
The cost of insuring against a corporate default increased in Europe. The Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated companies rose eight basis points to 476, paring its first annual rally since 2009.
The S&P GSCI gauge of 24 commodities slipped less than 0.1 percent, heading for a 0.1 percent gain this year. Soybeans added 0.4 percent and wheat advanced 0.5 percent. German power prices for 2014 fell 0.2 percent to a record 45.50 euros a megawatt-hour, according to broker prices compiled by Bloomberg.
The MSCI Emerging Markets Index advanced 0.4 percent to extend this year’s increase to 15 percent. China’s Shanghai Composite Index (SHCOMP) rallied 1.2 percent to the highest since June 21. The BSE India Sensitive Index added 0.6 percent, heading for its best year since 2009. Vietnam’s VN Index jumped to the highest since August, capping its largest weekly gain since February. Russia’s Micex Index fell 0.3 percent.
To contact the reporter on this story: Andrew Rummer in London at arummer@bloomberg.net
To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net
