SF: Commodities Drop on China Inflation as Italian Bonds, Euro Gain
Jan. 11 (Bloomberg) -- Commodities dropped as China’s inflation topped economist estimates, increasing concern officials may curb economic stimulus. Italian bonds jumped after borrowing costs fell at an auction, helping fuel a rally in the euro. U.S. stocks were little changed.
The Standard & Poor’s GSCI gauge of 24 commodities fell 0.8 percent at 9:31 a.m. in New York, with oil losing 0.7 percent and copper down 0.9 percent. The Stoxx Europe 600 Index slipped 0.2 percent, after retreating as much as 0.4 percent. The S&P 500 Index was little changed near a five-year high, while the Shanghai Composite Index sank 1.8 percent. Derivatives signaled there’s a 67 percent chance of Cyprus defaulting after it was downgraded.
China’s inflation quickened to a seven-month high in December, the National Bureau of Statistics said today after exports and credit growth underscored the strength of an economic rebound. The rally in Italian 10-year bonds narrowed the yield difference, or spread, over similar-maturity German bunds to less than 250 basis points for the first time since July 22, 2011.
Chinese authorities “don’t want unsustainable high growth rates with surging inflation,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said by e-mail today. “Hence monetary expansion and the ongoing stimulus will still be limited and very cautious.”
Crop Report
Oil fell 0.7 percent to $93.14 a barrel in New York and Brent crude slipped 1.4 percent to $110.30 a barrel in London. China is the biggest buyer of industrial metals and energy. Crop prices fell before the U.S. Department of Agriculture’s monthly supply and demand report, due at 12 p.m. in Washington. Soybeans dropped 0.7 percent.
The Stoxx 600 has fallen 0.4 percent this week. A gauge of basic-resources companies led declines among 19 industry groups today, slipping 1.4 percent, the most in a week on an intraday basis.
Cap Gemini SA, France’s biggest computer-services company, rose 3.3 percent to lead gains in the index today after rival Infosys Ltd. raised its full-year sales forecast. Getinge AB sank 9.4 percent, the biggest decline since March 2009, as the Swedish maker of sterilization systems said demand for its products weakened during the fourth quarter.
The S&P 500 has increased 0.4 percent this week, pushing the U.S. index to a five-year high.
Chevron Corp., the second-biggest U.S. energy company, said earnings increased from the third quarter as rising prices blunted the impact of declining oil output. The San Ramon, California-based company is scheduled to report full results on Feb. 1.
Wells Fargo
Wells Fargo & Co. slipped in pre-market trading after the largest U.S. mortgage lender’s fourth-quarter earnings report showed narrower net interest margins.
Japanese shares rose a third day, with the Nikkei 225 Stock Average capping nine weeks of gains, its longest weekly run since December 1988, as the Cabinet approved 10.3 trillion yen ($116 billion) in stimulus to speed the economic recovery. The yen earlier fell to 2 1/2-year low against the dollar before trading little changed at 88.83.
The yield on Italy’s two-year notes fell five basis points to 1.31 percent. The government sold 3.5 billion euros ($4.7 billion) of debt maturing in December 2015 at an average yield of 1.85 percent, down from a rate of 2.50 percent at the previous sale of the securities on Dec. 13.
The euro surged 0.7 percent to $1.3361 as the shared currency strengthened against all major peers.
Euribor Governance
Europe’s top banking and markets regulators told the European Banking Federation, which oversees Euribor, to strengthen governance procedures to ensure no banks try to manipulate the rate, according to a joint report by the European Banking Authority and European Securities and Markets Authority.
The cost of insuring Cyprus sovereign debt rose after Moody’s Investors Service cut the nation’s credit rating three steps to Caa3, citing the government’s projected debt load from recapitalizing the banking system. Credit-default swaps protecting $10 million of debt for five years were quoted at $3.68 million in advance and $100,000 a year by data provider CMA, compared with $3.52 million upfront yesterday.
Treasuries
The yield on 10-year Treasuries rose three basis points to 1.92 percent. Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said yesterday the central bank may not be doing enough to combat unemployment and meet its goal for price stability. Policy makers may have difficulty tying bond purchases to inflation and the unemployment rate, as the Fed has with its zero-rate policy, St. Louis Fed President James Bullard said in Madison, Wisconsin.
The MSCI Emerging Markets Index slipped 0.3 percent, heading for its first weekly drop in two months. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 0.7 percent. Hyundai Motor Co., South Korea’s biggest automaker, led the Kospi index 0.5 percent lower after the won gained to a five-month high against the dollar. Infosys Ltd., India’s second-largest software exporter, rallied 17 percent, the most on record, after raising its sales forecast. Brazil’s Bovespa index slipped 0.4 percent.
--With assistance from Corinne Gretler in Zurich and Claudia Carpenter, Emma Charlton, Paul Dobson, Andrew Rummer, Michael Shanahan and Stephen Voss in London. Editors: Michael P. Regan, Stuart Wallace
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net
