BLBG:European Stocks Drop With Bonds, Commodities as Yen Gains
European stocks fell, trimming their 12th consecutive monthly advance, and bonds declined on concern the Federal Reserve will pare debt purchases as the U.S. economy strengthens. Commodities slid as the International Monetary Fund cut its growth forecast for China, while the yen appreciated.
The Stoxx Europe 600 Index lost 1 percent at 10:55 a.m. in London and Standard & Poor’s 500 Index futures slipped 0.3 percent. Treasuries and German bunds dropped as bonds around the world headed for their steepest monthly slide since April 2004. The yen gained 0.6 percent to 101.74 per dollar. Australia’s currency sank to its weakest level since October 2011. European corporate bond risk rose for the first time in three days. The S&P GSCI (SPGSCI) gauge of 24 raw materials retreated 0.2 percent, with copper down 0.9 percent and oil 0.4 percent lower.
The U.S. is due to sell $35 billion of five-year notes today after a two-year auction yesterday drew the fewest bids since February 2011. That was the first offering since Fed Chairman Ben S. Bernanke said last week the central bank may reduce the pace of its purchases if officials see signs of sustained improvement in growth. The world’s biggest economy grew at an annualized 2.5 percent pace in the first quarter, unchanged from a preliminary reading last month, economists said before a Commerce Department report tomorrow.
“The U.S. economy is steadily recovering and a reduction in monetary easing appears to be coming into view,” said Marito Ueda, the senior managing director at FX Prime Corp., a currency-margin company in Tokyo.
Stock Rally
More than five shares dropped for every one that gained in the Stoxx 600. The decline pared this month’s advance to 2.9 percent as the gauge headed for the longest monthly winning streak since 1997.
Evraz Plc slid 2.2 percent and SSAB AB fell 0.5 percent after Stoxx Ltd. said it will remove the companies from the Stoxx 600 before the start of trading on June 24.
S&P 500 futures slipped, indicating that U.S. stocks will pare yesterday’s advance. The index has risen 3.9 percent so far in May, its biggest gain since January.
The MSCI Emerging Markets Index snapped a three-day advance, falling 0.7 percent. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong sank 1.6 percent. China’s expansion will be 7.75 percent this year and next, David Lipton, first deputy managing director of the IMF, said in Beijing today. In April, the IMF predicted growth of 8 percent this year and 8.2 percent in 2014.
Commodities Drop
Russia’s Micex Index slipped 1.8 percent to a one-month low and Turkey benchmark gauge drop 2.3 percent. The Philippine Stock Exchange Index jumped 1.6 percent after Finance Secretary Cesar Purisima said the government will ensure economic growth stays high.
West Texas Intermediate oil dropped to $94.65 a barrel and lead retreated 0.2 percent. China is the biggest buyer of industrial metals and energy. The declines trimmed this month’s gain in the S&P GSCI to 0.7 percent.
Saudi Arabia, the world’s largest crude exporter, is content with current conditions in the oil market, Ali al-Naimi, the kingdom’s petroleum minister, said in Vienna yesterday. The Organization of Petroleum Exporting Countries will keep its production quota unchanged on May 31, according to two OPEC delegates who asked not to be identified because the decision isn’t final.
Bonds Slide
The yield on 10-year Treasury notes climbed two basis points to 2.19 percent after reaching 2.23 percent, the highest since April 5, 2012. The yield rose 16 basis points yesterday as a report showed U.S. consumer confidence in May reached the strongest in more than five years.
The Treasury is also scheduled to sell $29 billion of seven-year securities tomorrow. At yesterday’s two-year sale, the bid-to-cover ratio, which gauges demand by comparing total bids with the amount of notes offered, was 3.04 times. The average for the previous 10 auctions was 3.72.
Germany’s 10-year bond yield rose two basis points to 1.52 percent. It was about 67 basis points less than that of similar-maturity U.S. debt, the widest spread since June 2010. U.K. 10-year gilts yielded 20 basis points less than Treasuries yesterday, the most since September 2006.
Securities in the Bank of America Merrill Lynch Global Broad Market Index have fallen 1.3 percent in May, poised for the steepest loss since April 2004.
The cost of insuring corporate bonds rose for the first time in three days, with the Markit iTraxx Europe Index of credit-default swaps linked to 125 investment-grade companies increasing 1.5 basis points to 96.4 basis points.
Aussie Weakens
The yen appreciated 0.3 percent to 131.22 per euro. Europe’s 17-nation shared currency rose 0.3 percent to $1.2890.
The Aussie fell to 95.28 U.S. cents, its lowest level since October 2011, as Pacific Investment Management Co. said it expects Australia’s central bank to reduce borrowing costs.
The krona strengthened the most in more than a month against the euro after data showed the Swedish economy expanded at a faster pace than economists predicted in the first quarter. Sweden’s currency appreciated as much as 0.7 percent against the euro to 8.5840.
The Canadian dollar depreciated to C$1.0421 per U.S. dollar the weakest level since June, before Mark Carney makes his final decision on interest rates as Bank of Canada governor.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
