BLBG:European Stocks Fall With Commodities as Bonds, Yen Gain
European stocks fell, trimming 12 months of gains, commodities declined and corporate bond risk rose to a one-month high. Treasuries and bunds advanced, while the yen strengthened.
The Stoxx Europe 600 Index slid 0.6 percent at 7:44 a.m. in New York, paring this month’s advance to 1.7 percent. Standard & Poor’s 500 Index futures lost 0.5 percent. The yield on 10-year Treasury notes lost three basis points and German yields fell five basis points. The yen appreciated for a third day, gaining 0.4 percent to 100.38 per dollar. South Africa’s rand tumbled to a four-year low. The cost of insuring corporate bonds with default swaps rose for a third day to the most since April 26. The S&P GSCI gauge of 24 commodities slid 0.5 percent.
Government bonds are headed for the worst month since 2004 as investors weigh prospects that the Federal Reserve will taper bond purchases and the Bank of Japan will push ahead with unprecedented stimulus. Consumer spending probably stagnated last month in the U.S., economists said before a Commerce Department report today, after data yesterday showed the economy grew an annualized 2.4 percent pace in the first quarter, down from a preliminary reading of 2.5 percent.
“Investors are waiting for further clues about the development and the state of the U.S. economy,” said John Plassard, who helps oversee $28 billion as vice president at Mirabaud Securities LLP in Geneva. “We’re also at the last day of what was an incredibly good month, so some profit taking is in store.”
Longest Rally
More than seven shares retreated for every one that gained in the Stoxx 600 today, as all 19 industry groups fell. The 12-month rally is the longest winning streak since 1997.
Royal KPN NV, the Dutch phone operator, and Salzgitter AG (SZG), Germany’s second-largest steelmaker, dropped more than 3.5 percent as analysts downgraded the shares. PostNL NV rallied 7.2 percent, the most in three months, after the Dutch mail-delivery company raised its profit forecast.
The decline in S&P 500 futures indicated the U.S. gauge will trim May’s 3.6 percent advance. The index has climbed for seven straight months, the longest stretch of gains since 2009.
The Thomson Reuters/University of Michigan final index of U.S. consumer sentiment climbed in May to 83.7, the highest level since July 2007, according to the median projection of economists in a Bloomberg survey. That matches this month’s preliminary reading and follows 76.4 in April. The report is due at 9:55 a.m. New York time.
Business Activity
A separate release at 9:45 a.m. New York time may show business activity in the U.S. stagnated in May. The MNI Chicago Report’s business barometer rose to 50 in May, from 49 the previous month, economists forecast in a Bloomberg survey. A reading of 50 is the dividing line between expansion and contraction.
The MSCI Emerging Markets Index (MXEF) fell 0.8 percent, declining 3.1 percent in May, the most in a year. India’s Sensex slid 2.3 percent, its biggest daily slump in more than a year, after the economy grew less than 5 percent for a second quarter.
Turkey’s benchmark gauge dropped 1.8 percent and two-year yields jumped 15 basis points to 5.94 percent after the trade deficit widened more than expected. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong sank 1 percent before a manufacturing report tomorrow.
Treasury 10-year yields fell to 2.08 percent. The yield has climbed 41 basis points since April 30, the most since December 2010, when it jumped 50 basis points. The rate reached 2.23 percent on May 29, the highest level since April 5, 2012.
German Bunds
Germany’s 10-year yield dropped to 1.47 percent, after reaching 1.55 percent on May 29, the highest since Feb. 25. The rate climbed 25 basis points since April 30.
Spain’s bonds fell, pushing the 10-year yield up six basis points to 4.42 percent and widening the yield gap to the benchmark German securities by 11 basis points to 2.96 percentage points. The French-German spread reached 62 basis points, the most since May 3.
U.S. government debt notes fell 1.8 percent in May as of yesterday, headed for the steepest monthly loss in three years, according to Bank of America Merrill Lynch. Securities in its Global Broad Market Index fell 1.4 percent through May 30, poised for the steepest loss since April 2004.
The yen gained against most of its 16 major peers, advancing 0.7 percent to 130.50 per euro. The 17-nation shared currency fell 0.4 percent to $1.3004.
The yen is still headed for an eighth successive monthly drop against the dollar, the longest run since 1996.
Rand Tumbles
The rand weakened 1 percent to 10.1380 per dollar, reaching the lowest since March 2009. It has declined for 16 of the past 17 trading days, depreciating 12 percent this month as the government struggles to resolve labor unrest that led to slower-than-forecast growth in the first quarter.
The Markit iTraxx Europe Index of credit-default swaps linked to 125 investment-grade companies increased three basis points to 103 basis points.
The S&P GSCI (SPGSCI) is down 0.8 percent this month, after tumbling 4.7 percent last month. West Texas Intermediate oil dropped 0.9 percent, heading for a third weekly decline after U.S. stockpiles climbed to the most in more than 80 years. OPEC maintained its production quota at a meeting in Vienna today.
U.S. natural gas slipped 0.3 percent today, extending this month’s drop to 7.6 percent, heading for the first monthly decline in four months. European Union carbon permits advanced 4.7 percent, heading for a 28 percent gain for May, the biggest for a month since February. The December contract fell to a record 2.46 euros a metric ton on April 17 after the European Parliament rejected a proposed measure to temporarily withhold some permits from the market in an effort to reduce a surplus. The assembly is due to vote again on the commission’s plan in July.
Gold fell 0.1 percent, extending this month’s retreat to 4.3 percent, the second consecutive monthly drop. Copper slipped 0.5 percent, paring this month’s gain to 3.2 percent, the first monthly advance since January.
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
