BLBG:Stocks Rise, Yen Falls On Fed Outlook As Corn Gains
Stocks rose, the euro climbed and the Japanese yen weakened as an unexpected drop in U.S. retail sales stoked speculation Federal Reserve Chairman Ben S. Bernanke will hint at further stimulus today. Corn advanced toward a record as U.S. crop conditions worsened.
The MSCI All-Country (MXWD) World Index rose 0.2 percent at 8:02 a.m. in London as the Stoxx Euro 600 Index gained 0.1 percent and Standard & Poor’s 500 Index futures added 0.5 percent. The Japanese yen slid against all 16 of its major peers while the euro strengthened 0.1 percent to $1.2287. Corn rose 1.1 percent to $7.81 a bushel in Chicago, the highest price for a most-active contract since June 2011. German 10-year government bonds fell before Spain sells as much as 3.5 billion euros ($4.3 billion) of shorter-maturity debt.
Bernanke will deliver his semi-annual report on the economy and monetary policy before Congress today, after a data yesterday showing a contraction in June retail sales kindled speculation the Fed will introduce more measures to support the world’s largest economy. Corn has risen 54 percent since June 15 as further evidence of damage from the worst U.S. drought in a generation stoked concern yields will drop, hurting output in the biggest exporter and lifting global food costs.
“There is market positioning for Bernanke to deliver something today,” said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. “There is a high risk of more policy easing before the end of this year.”
A third monthly drop in U.S. retail sales showed limited employment gains are taking a toll on the biggest part of the economy. The IMF lowered its 2013 forecast for global economic growth yesterday to 3.9 percent from 4.1 percent as Europe’s debt crisis prolongs Spain’s recession and slows expansions in emerging markets from China to India.
Corn Record
About 31 percent of the corn crop was in good-or-excellent condition as of July 15, down from 40 percent a week earlier, the U.S. Department of Agriculture said yesterday after the close of trade in Chicago. That’s the worst rating for this time of year since a drought in 1988. The most-active contract hit an all-time high of $7.9925 during the food crisis in June 2008.
The MSCI Asia Pacific Index (MXAP) increased 0.4 percent in its third day of gains. Most Japanese stocks fell, with the Topix Index capping its longest losing streak in two years after falling 0.4 percent. South Korea’s Kospi (KOSPI) was 0.2 percent stronger, Australia’s S&P/ASX 200 Index climbed 0.9 percent and Hong Kong’s Hang Seng Index rose 1.6 percent.
China Railway Group Ltd., the country’s biggest rail builder by market value, rose more than 5 percent in Hong Kong after the government boosted this year’s railway infrastructure investment plan by 9 percent. The Shanghai Composite Index rose 0.6 percent, rebounding from the lowest in more than three years, as China’s top train makers advanced. CSR Corp. (601766) gained as much as 2.1 percent and China CNR Corp. (601299) climbed 1.3 percent.
Tempered Growth
U.S. equity futures rebounded after the S&P 500 Index lost 0.2 percent in New York yesterday following the retail sales report. Companies including Goldman Sachs (GS) Group Inc., Intel Corp., and The Coca-Cola Co. are scheduled to report second- quarter earnings today.
The Federal Open Market Committee’s June 19 to June 20 meeting debated the need for further stimulus measures, the minutes released July 11 showed. Two participants supported additional bond purchases, while two others said only a further deterioration in the economy would warrant them.
The U.S. economy won’t grow much faster than 2 percent this year, restrained by caution among consumers and businesses, Kansas City Fed President Esther George said yesterday in a speech in Kansas City, Missouri.
Asset Purchases
The Fed will “certainly consider” additional asset purchases if the labor market doesn’t improve, Bernanke said June 20. The central bank bought $2.3 trillion of bonds in two rounds of so-called quantitative easing from 2008 to 2011 to cap borrowing costs and stimulate the economy. Last month, it expanded the program known as Operation Twist that replaces short-term Treasuries in its portfolio with longer-term debt.
Reports today may show the U.S. consumer-price index was unchanged in June from a month earlier and industrial production rose 0.3 percent after a 0.1 percent decline in May, according to Bloomberg News surveys of economists.
The Australian dollar strengthened against all its major peers and rose 0.5 percent to $1.0301. Australia’s central bank kept borrowing costs unchanged this month as domestic job growth and previous interest-rate reductions help the local economy weather global disruptions, minutes of its July 3 policy meeting released today showed.
The cost of insuring corporate and sovereign bonds in Japan and Australia from non-payment increased, according to traders of credit-default swaps. The Markit iTraxx Australia index climbed 2 basis points to 178.5 basis points, Westpac Banking Corp.’s prices show. The Markit iTraxx Japan index added 1.5 basis points from its close last week to 178, Citigroup Inc. prices show.
To contact Bloomberg News staff for this story: Chua Baizhen in Beijing at bchua14@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
