BLBG:Euro Strengthens as Italian Bonds Fluctuate After Debt Auction
The euro strengthened from a seven- week low and Italian bonds fluctuated after the country sold 6.5 billion euros ($8.5 billion) of debt amid political turmoil. Oil advanced.
The euro appreciated 0.3 percent to $1.3095 at 11 a.m. in London after earlier rising as high as 1.3122. Italy’s 10-year bond yield was at 4.90 percent after jumping 41 basis points yesterday. The Stoxx Europe 600 Index (SXXP) and Standard & Poor’s 500 Index futures swung between gains and losses. The Nikkei 225 Stock Average (NKY) capped its biggest two-day decline since November 2011. The yen strengthened against all but one of its 16 major peers and West Texas Intermediate oil gained 0.2 percent.
Italy sold five- and 10-year bonds in its first debt auction following inconclusive election results that pushed yields to a four-month high yesterday. Federal Reserve Chairman Ben S. Bernanke will testify for a second day before lawmakers after defending the central bank’s asset purchases yesterday. Pending sales of existing homes in the U.S. rose last month, data may show.
“Developments in the U.S. and Europe are giving markets mixed signals and creating short-term volatility,” Fitzgerald Aclan, who helps manage $22 billion at Manila-based BDO Unibank Inc. (BDO), said by phone today. “The U.S. is growing and seems to be doing better than expected while the situation in Europe may turn worse than expected and lead to a near-term correction.”
Italian Swaps
The cost of insuring against losses on Italian government debt headed for the biggest monthly increase since November 2011 after a national poll produced a hung parliament, creating the risk of another election. An anti-austerity movement won more than 25 percent of the popular vote.
Credit-default swaps linked to Italy increased seven basis points to 299, the highest since November 2012.
Italian 10-year securities pared a monthly decline as the Rome-based Treasury sold 4 billion euros of new 10-year bonds at an average yield of 4.83 percent. That’s up from 4.17 percent at a Jan. 30 auction. It allotted 2.5 billion euros of five-year notes at 3.59 percent, compared with 2.94 percent at last month’s sale.
Italian government bonds handed investors a loss of 1.3 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German debt lost 0.5 percent, while Spanish securities returned 1.3 percent, the indexes show.
Unity Government
European Union leaders piled pressure on Italy’s rival factions to form a unity government committed to budget rigor. EU President Herman Van Rompuy warned in Tallinn, Estonia, that backsliding on budget discipline and economic reforms would shatter market confidence in the 17-nation currency union’s crisis management.
European companies from Bouygues SA, France’s second- largest builder, to European Aeronautic, Defence & Space Co. reported earnings that beat estimates.
Bouygues rallied 7.4 percent, the most in 18 months, after forecasting margins will widen this year. EADS (EAD), the parent of Airbus, climbed 5.1 percent after predicting earnings will rise in 2013. Swiss Life Holding AG surged 7 percent as Switzerland’s biggest life insurer maintained its dividend and reported a narrower-than-estimated loss.
Vodafone Group Plc (VOD) advanced 1.9 percent as three people familiar with the matter said the mobile-phone company has put plans to approach Kabel Deutschland Holding AG about a takeover on hold. Kabel Deutschland slid 4.7 percent.
S&P 500 futures earlier rose as fell as much as 0.1 percent. First Solar Inc. sank 11 percent in pre-market New York trading as the world’s biggest maker of thin-film solar panels said first-quarter revenue will miss analysts’ expectations.
Bernanke Testimony
Bernanke’s testimony will start at 10 a.m. in Washington. The Fed chairman said yesterday the central bank’s asset purchases are supporting the U.S. economy with little risk of inflation or bubbles in stocks and bonds. The Fed is buying $85 billion of Treasury and mortgage bonds a month to bolster the economy by putting downward pressure on interest rates.
Orders for U.S. durable goods probably fell in January for the first time in five months as demand for commercial aircraft slumped, economists forecast before a Commerce Department report at 8:30 a.m. in Washington. The 4.7 percent drop would follow a 4.3 percent gain in December, according to the median forecast of 77 economists surveyed by Bloomberg. Another report may show pending sales of existing homes rose.
The Nikkei 255 capped a two-day, 3.5 percent slump after closing at its highest level since September 2008 on Feb. 25. Toyota Motor Corp. (7203), the world’s biggest automaker, sank 2.3 percent today. The MSCI Asia Pacific excluding Japan Index rose 0.6 percent, led by gains in Australia, Indonesia and India.
Emerging Markets
The MSCI Emerging Markets Index (MXEF) gained 0.3 percent, rebounding from a two-month low. The Shanghai Composite Index advanced 0.9 percent on speculation China will take steps to support equities. India’s Sensex gauge added 0.9 percent after a government economic survey said growth is recovering.
Oil rebounded after yesterday falling to the lowest since Jan. 4. Iran is preparing a counter offer to a proposal by the U.S. and its partners to ease some sanctions if the nation curbs its atomic activities, according to two officials close to the negotiations. Cotton climbed 1.1 percent, leading gains in commodities, and lead advanced 0.6 percent. Lead is mostly used in car batteries.
To contact the reporter responsible for this story: Michael Shanahan at mshanahan3@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
