BLBG:Yen Weakens to 16-Month Low Versus Euro as Italian Bonds Decline
The yen weakened to a 16-month low against the euro on speculation the government will take steps to boost growth. European stocks and U.S. equity futures were little changed as U.S. lawmakers prepared to meet for budget talks. Italian 10-year bonds stayed lower after a debt auction.
The Japanese currency dropped 0.5 percent to 113.77 per euro as of 10:52 a.m. in London after falling to 113.84, the weakest since Aug. 4, 2011. The Stoxx Europe 600 Index (SXXP) rose 0.1 percent, bringing this year’s advance to 15 percent. Futures on the Standard & Poor’s 500 Index increased less than 0.1 percent. Italian 10-year yields climbed six basis points. The cost of insuring against default on European corporate debt rose to a one-week high. Turkish stocks rose to a record.
U.S. lawmakers return to Washington today for budget negotiations aimed at avoiding more than $600 billion in tax increases and spending cuts that take effect Jan. 1. Japan may report a decline in core consumer prices tomorrow, supporting newly installed Prime Minister Shinzo Abe’s case to add stimulus. U.S. data today may show gains in November home sales, a drop in consumer confidence and little change in initial jobless claims, economists said.
“Even as chances of a last-minute deal are diminishing quickly, not everybody is willing to bet just yet that the U.S. will be going over the cliff,” Markus Huber, head of German sales trading at ETX Capital in London, said in a note to investors. “Some are still confident that a compromise will be reached simply because nobody wants to be held responsible if the U.S. economy might be pushed back into recession.”
Japanese Yen
The yen was at 85.75 per dollar after falling to 85.87, the weakest since Sept. 17, 2010. Japan’s consumer prices excluding fresh food fell 0.1 percent last month from a year earlier, according to the median estimate in a Bloomberg survey. That would be the sixth decline in seven months and compares with the Bank of Japan (8301)’s target of 1 percent inflation.
The euro climbed 0.3 percent to $1.3266, after rising 0.3 percent yesterday.
The Japanese currency has tumbled 14 percent this year, the biggest drop among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar is the second-worst performer with a 3 percent slide, while the euro has lost 0.5 percent. Norway’s krone is the best performer, climbing 4.7 percent, the indexes show.
The krone advanced 0.4 percent to 5.5687 per dollar today.
Further depreciation of the yen versus the dollar is one of the surest bets going into the new year, according to John Taylor, founder and chairman of New York-based currency hedge fund FX Concepts LLC. The yen will weaken to 90 per dollar before a resumption in risk aversion prompts investors to return to traditional refuge currencies, he said.
Stoxx 600
The Stoxx 600 is on course for the biggest annual gain since 2009. Bankia (BKIA) plunged 14 percent today as Spain’s bank- rescue fund said the lender has a negative value of 4.15 billion euros. Clariant AG, a Swiss chemical company, climbed 4.3 percent after selling units for 502 million Swiss francs ($550 million).
The MSCI Asia Pacific Index rose 0.5 percent, led by Japanese exporters and financial companies. The gauge has risen 13 percent this year. The Nikkei 225 Stock Average climbed 0.1 percent to the highest closing level since March 10, 2011.
The S&P 500 has declined for three straight days. A report today may show purchases of new U.S. homes quickened to a 380,000 annual pace in November, according to the median estimate of 71 economists in a Bloomberg survey. That would be the most since April 2010.
Economic Reports
Other data may show consumer confidence declined to 70.0 in December from 73.7 and initial claims for jobless benefits were 360,000 last week compared with 361,000, according to as many as 66 economist estimates compiled by Bloomberg.
Italy sold 3.25 billion euros of zero-coupon securities maturing in 2014 to yield 1.884 percent compared with 1.923 percent Nov. 27. The sale is the first since Prime Minister Mario Monti announced on Dec. 23 that he would consider being a candidate for premier in elections on Feb. 24-25.
Treasuries declined, pushing the 10-year yield up one basis point to 1.77 percent. German bunds were little changed, leaving the 10-year yield at 1.37 percent.
Treasury Secretary Timothy F. Geithner said yesterday the U.S. government will hit its statutory debt ceiling on Dec. 31 and he will take “extraordinary measures” to postpone a U.S. default for about two months, allowing more time for lawmakers to agree a deficit-reduction deal.
Brent Falls
Natural gas slumped 1.1 percent and Brent crude declined 0.3 percent to $110.73 a barrel. Trading on the London Metal Exchange resumed after a two-day holiday.
The Istanbul Stock Exchange National 100 Index advanced for a fourth day, rising 0.5 percent to a record 78397.76. Turkey was raised to investment grade by Fitch Ratings last month. Turkiye Is Bankasi AS, Turkey’s largest bank by assets, gained almost 1 percent and Istanbul-based Akbank TAS rose 0.5 percent.
The Markit iTraxx Europe index of credit-default swaps linked to 125 investment grade companies increased one basis points to 113 basis points.
To contact the reporter on this story: Claudia Carpenter at ccarpenter2@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
