BLBG: Euro, Commodities Fall Before Bernanke, Trichet; Bonds Advance
The euro weakened from an eight-month high against the yen, commodities dropped and emerging market shares fell for the first time in a week before signals from central bankers on the direction of the global economy.
The euro slid 0.3 percent to 136.33 yen as of 11:20 a.m. in London. The MSCI World Index of stocks was little changed, paring an earlier decline of 0.3 percent after its biggest advance in four weeks yesterday. The MSCI Emerging Markets Index dropped 0.8 percent, the steepest retreat in five days. Oil and copper fell for the first time in seven days. Treasuries rose after 10-year yields rose the most in eight months yesterday.
“We’re not getting carried away with the recovery story,” said Sean Maloney, a fixed-income strategist at Nomura International Plc in London. “The real data are still lagging and we are seeing an economy that’s still bad.”
Federal Reserve Chairman Ben S. Bernanke is due to testify before Congress on the U.S. economy this week and European Central Bank President Jean-Claude Trichet heads a meeting to set interest rates in Frankfurt. Traders are hesitating to buy stocks after valuations rose to the highest levels in as long as five years yesterday.
Europe’s Dow Jones Stoxx 600 Index fluctuated between gains and losses after yesterday’s rally lifted its valuation to 25.4 times the profits of member companies, the most expensive level since March 2004. The MSCI Emerging Markets Index traded at 15.3 times earnings, the highest since December 2007, data compiled by Bloomberg show.
200-Day Average
Futures on the Standard & Poor’s 500 Index rose 0.3 percent after the benchmark index for U.S. equities surged 2.6 percent to a seven-month high yesterday. The index closed above its average price over the past 200 days for the first time since December 2007, a bullish signal to analysts who study charts to predict market trends.
The gauge reached a value of 15.4 times the earnings of its companies, the highest level since October, after reports on manufacturing, personal income and construction spending beat economists’ forecasts yesterday.
“Lest all this sound too sanguine, there is no question that there are significant weaknesses in the data, particularly in the U.S.,” Dominic Wilson, director of global macro and markets research at Goldman Sachs Group Inc. in New York, wrote in a report.
Five stocks declined for every four that advanced today in the MSCI Asia Pacific Index, which lost 0.2 percent. The gauge trades at 43.1 times profit, the most expensive since at least 2003, weekly data compiled by Bloomberg show.
Korea Missile
The MSCI Asia Pacific measure pared an earlier advance of as much as 1.2 percent after Yonhap News said North Korea was preparing to launch a medium-range missile. The U.K.’s FTSE 100 index fell as much as 1.4 percent from its strongest in almost five months as Barclays Plc lost 14 percent after Abu Dhabi investors sold 4.1 billion pounds ($6.8 billion) of the shares.
Analysts said they’re concerned about the speed of the global recovery. Switzerland’s economy contracted 0.8 percent in the first quarter, the fastest pace in almost 15 years, the government said. General Motors Corp. filed for bankruptcy court protection yesterday and received permission to borrow $15 billion of a planned $33.3 billion loan.
Europe’s unemployment rate rose to the highest in almost 10 years in April, increasing to 9.2 percent from 8.9 percent in March, the European Union statistics office in Luxembourg said today. That was the most since September 1999. Economists expected an April rate of 9.1 percent, according to the median of 29 forecasts in a Bloomberg News survey.
Oil, Copper
Crude oil for July delivery fell 0.7 percent to $68.09 a barrel on the New York Mercantile Exchange, after gaining 12 percent since May 22. Copper for delivery in three months dropped 1.5 percent to $5,000 a metric ton on the London Metal Exchange, ending a six-session advance of 14 percent.
Financial and energy companies led the decline in emerging- market shares after Goldman sold a stake in Industrial & Commercial Bank of China Ltd. ICBC, the world’s biggest bank by market value, fell 4.1 percent in Hong Kong trading after the sale of HK$14.8 billion ($1.91 billion) of shares. OAO Lukoil, the second-largest Russian oil producer, slid 1.6 percent.
Treasuries rose, sending yields on 10-year notes down four basis points to 3.63 percent from the highest in six months, as Treasury Secretary Timothy Geithner said there will be demand for the record debt the U.S. is selling.
Geithner said in Beijing he found a “very sophisticated understanding” of why the U.S. is running up budget deficits while vowing to rein in borrowing later.
The U.S. government and the Fed pledged $12.8 trillion to revive the economy after the collapse of bonds tied to subprime mortgages froze credit markets in August 2007, triggering losses at banks of almost $1.5 trillion.
The Libor-OIS spread, a measure of banks’ reluctance to lend, narrowed to less than 44 basis points today, the lowest level in almost 16 months. It widened to a record 364 basis points in October following the failure of New York-based Lehman Brothers Holdings Inc.
