BS: Treasuries Climb With Dollar as Europe Stocks Pare Gains
U.S. Treasuries advanced for a second day and the dollar strengthened on speculation the so-called fiscal cliff and Federal Reserve bond purchases will boost demand for debt. European stocks gained, while Spanish bonds fell after a debt sale.
Businessweek
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The yield on five-year Treasuries fell two basis points to 0.66 percent at 7:20 a.m. in New York. The dollar advanced against 11 of its 16 major peers. The Stoxx Europe 600 Index (SXXP) rose 0.4 percent. Standard & Poor’s 500 Index futures added 0.2 percent after yesterday decreasing 2.4 percent. The yield on Spain’s 10-year rose 13 basis points to 5.82 percent. Oil climbed 1 percent and the S&P GSCI gauge of 24 commodities advanced 0.5 percent.
Treasuries rose yesterday as President Barack Obama won re- election and his Democrats held a majority in the Senate, while Republicans kept control of the House of Representatives. Obama, who has supported the Fed’s bond-buying program to revive the economy, needs to negotiate a solution to the fiscal cliff, $607 billion of tax increases and spending cuts that take effect next year, if he is to prevent the economy falling back into a recession, according to UBS AG.
“We’re back in the lines of political games,” said Roger Bridges, who oversees the equivalent of $15.6 billion of debt as head of fixed income at Tyndall Investment Management Ltd. in Sydney, a unit of Japan’s Nikko Asset Management Co. “If we’re going to continue with this policy uncertainty, then they will send the economy downward and bonds will rally.”
Treasuries Gain
The yield on 10-year Treasuries fell two basis points to 1.67 percent. The dollar gained 0.3 percent against the euro as the European Central Bank meets today.
Ten-year notes have a bid based upon the expectation for easy money from the Fed “as far as the eye can see,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said yesterday on Bloomberg Television.
The pound pared declines against the slipping, less than 0.1 percent to $1.5979, after the Bank of England stopped expanding its bond buying program. U.K. gilts fell, with the yield on the 10-year bond rising as many as three basis points to 1.78 percent.
The yield on Spain’s two-year note rose 10 basis points to 3.22 percent. Spain sold 4.76 billion euros ($6.1 billion) of bonds, more than its maximum target.
The Stoxx 600 rebounded from its biggest drop in two weeks as results from companies including Hermes International SCA and Swiss Re Ltd. beat estimates. Hermes, the French maker of Birkin bags and silk scarves, jumped 3.5 percent after increasing its sales forecast. Swiss Re, the world’s second-biggest reinsurer, added 1.5 percent, saying it may pay a special dividend after third-quarter profit beat analyst expectations.
Siemens AG climbed 3.5 percent as Europe’s largest engineering company reported fiscal four-quarter profit that exceeded estimates and unveiled a 6 billion-euro ($7.7 billion) cost-cutting plan. Vallourec SA, a producer of steel pipes for the oil and gas industry, advanced 5.7 percent as third-quarter earnings topped projections.
Earnings Scorecard
Some 66 percent of Stoxx 600 companies that reported earnings since yesterday’s market close have topped analysts’ estimates, according to data compiled by Bloomberg. The total for all firms releasing results since Oct. 9 is 54 percent.
In the U.S., 14 members of the S&P 500 are reporting today, including Duke Energy Corp. and Walt Disney Co. A report at 8:30 a.m. Washington time may show initial claims for jobless benefits rose to 365,000 last week from 363,000 the previous period, according to a Bloomberg survey of economists.
The S&P GSCI rebounded after falling 2.4 percent yesterday. Copper fell 0.2 percent to $7,589.75 a metric ton, the second consecutive decline. China is the biggest buyer of industrial metals and energy.
Oil rose to $85.26 a barrel after yesterday falling the most this year. The Organization of Petroleum Exporting Countries will present its World Oil Outlook on global oil markets at 2:30 p.m. in Vienna.
The MSCI Emerging Markets Index (MXEF) sank 1 percent, the most in two weeks. The Shanghai Composite Index (SHCOMP) fell 1.6 percent as China’s leadership congress began today, and South Korea’s Kospi Index slumped 1.2 percent after GS Engineering & Construction Corp. said profit tumbled. Russia’s Micex Index decreased 0.7 percent and India’s Sensex lost 0.3 percent.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net;
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net
