BLBG: European Bonds Fall as Dollar Gains; Stocks Pare Losses
European bonds fell and the dollar strengthened amid speculation that U.S. interest rates will rise sooner than policy makers signaled. Stocks in Europe pared losses.
Germany’s 10-year bund yield climbed two basis points to 1.02 percent at 7 a.m. in New York, while the yield on Spain’s 10-year bonds increased nine basis points to 2.29 percent. The Stoxx Europe 600 Index fell less than 0.1 percent, trimming an earlier loss of 0.6 percent. Apple Inc. (AAPL) dropped as much as 0.9 percent in premarket New York trading after introducing a smartwatch and new iPhones. Standard & Poor’s 500 Index futures rose 0.1 percent. Banco Santander SA slid 0.9 percent after the death of its chairman. The Bloomberg Dollar Spot Index rose 0.1 percent.
BlackRock Inc., the world’s biggest money manager, is among investors speculating that an improving labor market and signs of inflation may justify sooner-than-forecast rate increases by the Federal Reserve. Chinese Premier Li Keqiang announced money-supply growth that was the slowest in five months. Germany sold 10-year debt and the U.S. will also hold an auction today.
“The bond market had a strong rally in August and it seems to be catching up with reality a bit,” said Luca Jellinek, head of European rates strategy at Credit Agricole SA’s investment banking unit in London. “A lot of people I talked to think yields at current levels are abhorrent anyway.”
The Stoxx Europe 600 Index was little changed after falling for three days.
Banco Santander
Banco Santander slid after Spain’s biggest bank said Chairman Emilio Botin died of a heart attack at the age of 79. The board will meet today to name a successor.
Kingfisher Plc rose 2.9 percent after Europe’s largest home-improvement retailer said Ian Cheshire will step down as chief executive officer and hand leadership of the company to the head of the French Castorama unit, Veronique Laury.
Futures (SPX) on the S&P 500 expiring this month were little changed today after the index dropped the most in a month yesterday. The gauge closed at its lowest level since Aug. 22 after a two-day decline of 1 percent.
Before yesterday’s 0.7 percent drop, the S&P 500 Index hadn’t posted a move of more than 0.5 percent in either direction for 14 straight days, the longest streak since 1995, data compiled by Bloomberg show.
Apple Trading
Apple fell to as low as $97.15 in premarket New York trading after dropping 0.4 percent to $97.99 yesterday. The stock, up 22 percent this year, has typically fallen on other days when Apple introduced new products. Shares dropped 2.3 percent Sept. 10, 2013, the day the iPhone 5s and 5c debuted.
Apple’s Asian suppliers retreated. Taiwan Semiconductor Manufacturing Co. slid 1.6 percent, Taipei-based Foxconn Technology Co. fell 1.2 percent and China’s AAC Technologies Holdings Inc. dropped 2.3 percent in Hong Kong.
BlackRock’s Chief Investment Officer Rick Rieder said interest rates are likely to drift higher as research from the Federal Reserve Bank of San Francisco Sept. 8 indicated investors may be underestimating how quickly U.S. policy makers may tighten policy. Rieder said last month in a Twitter post that the Fed may increase rates early in 2015. Fed officials next meet Sept. 16-17.
Rate Bets
Traders are bringing forward bets for when the Fed will begin raising interest rates. They see a 79 percent chance of an increase to at least 0.5 percent by September 2015, federal fund futures data showed yesterday. That compares with a 73 percent probability seen on Aug. 29. Policy makers have kept their target for overnight lending between banks in a range of zero to 0.25 percent since December 2008.
The dollar strengthened against its higher-yielding peers as a measure of currency-market volatility reached its strongest level since February. The U.S. currency appreciated 0.6 percent to 91.47 U.S. cents per Australian dollar. It gained 0.1 percent against the South African rand and 0.5 versus India’s rupee.
The Bloomberg Dollar Spot Index, which tracks the greenback against a basket of 10 leading currencies, rose to its strongest level since July 2013.
Deutsche Bank AG’s Currency Volatility Index jumped to 7.79 percent, the highest since Feb. 6 on a closing-price basis. The measure was as low as 4.93 percent on July 21.
Money Supply
The yield on 10-year Treasuries climbed one basis point to 2.52 percent as the notes declined for a fifth-straight day before a sale of $21 billion of debt today. Spain’s 10-year yield increased as much as 10 basis points while Italy’s increased five basis points to 2.42 percent.
China’s M2 money supply, the government’s broadest measure, rose 12.8 percent in August from a year earlier, Premier Li said yesterday in Tianjin, the state-run Xinhua News Agency reported ahead of the official release by the People’s Bank of China. That compares with a 13.5 percent pace in July, which was also the median estimate for August in a Bloomberg News survey of analysts.
The Shanghai Composite Index dropped 0.4 percent and the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong sank 2.6 percent, the most in seven months. The city’s markets were shut yesterday for a holiday.
China may report as early as today new credit data for the month of August. Figures on inflation, retail sales and industrial output are also due this week.
The MSCI Emerging Markets Index fell for a fifth day, the longest slump in almost three months, losing 1.1 percent.
Russia’s ruble declined 0.2 percent, weakening for a third day, while the Micex equity index was little changed. European Union governments are scheduled to meet today to consider tougher Russian sanctions as the bloc weighs the viability of President Vladimir Putin’s truce in Ukraine.
Aluminum for delivery in three months dropped 0.9 percent to $2,049.25 a metric ton after touching $2,047, the lowest since Aug. 20. Zinc lost 0.8 percent to $2,285.25 a ton after reaching $2,282.50, the lowest since Aug. 19. China is the biggest buyer of industrial metals.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Shelley Smith in London at ssmith118@bloomberg.net
To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net Shelley Smith, Michael Shanahan
