BLBG:Treasuries Advance as Stocks Fluctuate After IMF Cuts Forecast
Treasuries rose, commodities pared their advance and stocks fluctuated after the International Monetary Fund cut its global growth forecasts. The euro weakened before German Chancellor Angela Merkel meets with Greek Prime Minister Antonis Samaras.
U.S. 10-year note yields dropped four basis points as of 7:23 a.m. New York time as the market opened after a holiday. The Standard & Poor’s GSCI gauge of 24 commodities was 0.4 percent higher, after earlier rising as much as 0.7 percent, and the Stoxx Europe 600 Index (SHCOMP) was little changed. The euro slid versus 13 of its 16 major peers while the Australian dollar rebounded from a three-month low. The Shanghai Composite Index jumped 2 percent.
The world economy will grow 3.3 percent this year, the slowest pace since the 2009 recession, the IMF said, reducing a July prediction of 3.5 percent. European finance ministers praised Greece’s determination to cut spending and declined to press Spain for more budget cuts at a meeting yesterday. The U.S. third-quarter earnings season begins with Alcoa Inc. (AA) today, the fifth anniversary of the S&P 500’s record close at 1,565.15.
“The news flow hasn’t been particularly attractive for risk assets,” said Michael Leister, a fixed-income strategist at Commerzbank AG in London. Europe’s leaders didn’t deliver a “breakthrough regarding Spain and Greece, so all these factors are coming together to give Treasuries a bid,” he said.
European Stocks
The Stoxx 600 Index (SXXP) recovered losses after sliding as much as 0.4 percent. Nationalized Spanish lender Bankia dropped 6.2 percent as Expansion reported that parent company BFA will book losses of more than 4.5 billion euros ($5.8 billion) this year. The volume of shares changing hands in Stoxx 600 companies was 25 percent lower than the 30-day average, data compiled by Bloomberg show.
Copper for three-month delivery was little changed at $8,180.50 a metric ton on the London Metal Exchange. Gold for immediate delivery was at $1,774.47 an ounce in London trading, erasing a gain of as much as 0.3 percent.
Wheat for December delivery gained 1 percent to $8.6925 a bushel on the Chicago Board of Trade, advancing for a second day, on speculation that the U.S. may lower its forecasts for global supplies as dry weather damages crops from Russia to Australia. The most active contract has surged 33 percent this year. The U.S. Department of Agriculture is scheduled to release its forecasts on Oct. 11 in Washington.
Crude Discount
Thediscount of the benchmark U.S. crude oil grade to European futures closed at $22.49 yesterday, the largest gap since Oct. 20, 2011.
The yield on benchmark U.S. 10-year notes slid to 1.71 percent, based on Bloomberg Bond Trader data, as the IMF said there is an “alarmingly high” risk of a steeper slowdown.
Europe’s 17-nation shared currency weakened 0.2 percent to $1.2942 and dropped 0.3 percent to 101.25 yen. The franc dropped the most since Sept. 13 against the euro after two of the world’s biggest custody banks said they will charge depositors to hold the Swiss currency.
The Washington-based IMF cut its global growth forecasts for 2013 to 3.6 percent from 3.9 percent as the euro area’s debt crisis intensifies. European finance ministers meet for second day in Luxembourg after yesterday declaring operational the permanent aid fund, the 500 billion-euro European Stability Mechanism.
Stocks Recovery
The S&P 500 index (SPX) closed yesterday at 1,455.88, less than 7 percent below the 2007 record. The measure has recovered after plunging 57 percent to a 12-year low on March 9, 2009, as the subprime mortgage crisis spread among financial firms. Consumer discretionary shares and financial firms, which advanced more than 150 percent, have led the gains.
Banks, lenders and insurers are still down 55 percent since October 2007, more than three times any other industry, data compiled by Bloomberg show. Even after doubling, U.S. stocks are trading at 14.8 times earnings, a 9.8 percent discount to their five-decade average ratio, data compiled by Bloomberg show.
The Shanghai Composite Index rose as investors bet the government will come up with steps to support the market. South African’s rand strengthened 1.6 percent to 8.7467 per dollar, climbing for the first time in five days, after the currency’s decline to the weakest in more than three years yesterday.
The Australian dollar climbed 0.4 percent to $1.0228 after touching $1.0149 yesterday, the lowest since July 13.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net
