BLBG:Stocks, Commodities Drop on Fed Minutes, Spanish Auction
European stocks, U.S. index futures and commodities fell after the Federal Reserve signaled it may refrain from more monetary stimulus and Spain sold less debt than targeted. The euro weakened and Spanish five-year yields climbed to an almost three-month high.
The Stoxx Europe 600 Index lost 1.1 percent as of 8:27 a.m. in New York. Standard & Poor’s 500 Index futures slid 0.8 percent and the MSCI Asia Pacific Index (MXAP) dropped 1.4 percent. The euro depreciated to a three-week low against the yen, while 10- year Treasury yields fell five basis points to 2.25 percent. Spanish five-year yields surged 21 basis points to 4.47 percent, the highest since January. The S&P GSCI gauge of commodities retreated 0.8 percent.
The Fed will refrain from increasing monetary accommodation unless the economic expansion falters or prices rise at a rate slower than its 2 percent target, according to minutes of its March 13 policy meeting released yesterday. Spain sold 2.59 billion euros ($3.41 billion) of bonds due between January 2015 and October 2020, compared with a planned maximum of 3.5 billion euros.
“The perception is that you’re taking away the safety net of excess liquidity that lifted asset prices,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “Given the exceptionally good run we’ve had year- to-date, people are reassessing their risk-reward scenarios.”
European Central Bank officials meeting in Frankfurt today kept the benchmark interest rate at a record low of 1 percent, as predicted by all 57 economists in a Bloomberg News survey.
Autos Retreat
More than 20 shares fell for each that advanced in the Stoxx 600. Automakers led declines as U.S. sales of cars and light trucks in March missed the average estimate in a Bloomberg survey of analysts. PSA Peugeot Citroen (UG) slid 4.8 percent and Volkswagen AG fell 2.8 percent. Petropavlovsk Plc, a producer of gold in Russia, sank 7.4 percent as the precious metal retreated for a second day.
The cost of insuring sovereign debt rose, with the Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments climbing 5.8 basis points to 270. Swaps on Spain jumped 18 basis points to 457, the highest since Nov. 28, according to CMA.
The decline in S&P 500 futures indicated the U.S. gauge will drop for a second day, even after an industry report showed companies in the U.S. expanded payrolls in March. Employment increased by 209,000 for the month after a revised 230,000 gain in February, figures from ADP Employer Services showed today. The median estimate in the Bloomberg News survey called for a 206,000 increase.
SanDisk Corp. slid 6.5 after the biggest maker of flash- memory cards cut its forecast for first-quarter sales and profitability, citing weaker-than-expected pricing and demand for components that store data in mobile phones. Monsanto Co. climbed 0.7 percent after the world’s largest seed company raised its full-year earnings forecast as second-quarter profit beat analysts’ estimates amid growth in genetically modified corn sales.
Service Industries
U.S. service industries expanded at a slower pace in March, a report at 10 a.m. in New York may show. The Institute for Supply Management’s non-manufacturing index fell to 56.8 from 57.3 in February, according to the median estimate in a Bloomberg News survey of 68 economists. Readings greater than 50 signal growth.
U.S. equities fell yesterday as the Fed minutes showed less urgency to add stimulus. Policy makers last month affirmed the plan, first announced in January, to hold interest rates near zero through late 2014 on concern the economy may fail to grow fast enough to continue bringing down unemployment.
The dollar rose 0.6 percent to $1.3150 against the euro. It earlier reached $1.3141, the strongest since March 22.
“There’s no justification for the Fed to ease monetary policy further,” Vasu Menon, vice president for wealth management at Oversea-Chinese Banking Corp., said in a Bloomberg Television interview from Singapore. “The market has run up at a very heavy pace, so I think a breather or a correction would be a welcome change for now.”
Brent Crude
Brent crude for May fell 0.6 percent to $124.06 a barrel on London’s ICE Futures Europe exchange on forecasts for an increase in U.S. crude inventories in a government report later today. European Union carbon permits for December 2012 delivery traded at 6.48 euros a metric ton on ICE after falling yesterday to 6.05 euros, a record low for that contract. Copper dropped 1.7 percent to $8,466.25 a ton and nickel slumped 2.4 percent.
China accelerated the opening of its capital markets by more than doubling the amount foreigners can invest in stocks, bonds and bank deposits. The China Securities Regulatory Commission increased quotas for qualified investors to $80 billion from $30 billion, according to a statement yesterday. Offshore investors will also be allowed to pump an extra 50 billion yuan ($7.95 billion) of local currency into the country, up from 20 billion yuan.
Emerging Markets
Markets in China and Taiwan were shut for holidays. The MSCI Emerging Markets Index (MXEF) fell 1.3 percent, halting a three- day, 2.2 percent climb. The Micex Index (MICEX) fell 2.5 percent in Moscow and the FTSE/JSE Africa All Shares Index (JALSH) slid 1.3 percent in Johannesburg as the prices of oil and metals fell. Turkey’s ISE National 100 Index (XU100) retreated 1.1 percent. South Korea’s Kospi Index (HSCEI) slid 1.5 percent, the sharpest loss since Dec. 19.
Australia’s dollar sank to an 11-week low as data showed the nation had an unexpected trade deficit. The so-called Aussie slid 0.7 percent to $1.0262 and touched $1.0244, the weakest since Jan. 16. Australia posted a trade deficit for a second month in February, completing the first consecutive shortfalls in two years.
To contact the reporter on this story: Michael Shanahan in London at mshanahan3@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
