BS: Stocks Retreat With Dollar as Crops Lead Advance in Commodities
European stocks fell from almost a six-week high as German investor confidence unexpectedly dropped, while U.S. equities dropped as Coca-Cola Co. slid after profit decreased. The dollar weakened before Federal Reserve Chairman Ben S. Bernanke speaks to Congress tomorrow.
The Stoxx Europe 600 Index lost 0.7 percent at 11:16 a.m. in New York while the Standard & Poor’s 500 Index (SPX) lost 0.4 percent after the U.S. gauge closed at a record yesterday. Cocoa, soybeans, corn and wheat helped lead the S&P GSCI Index to a 0.3 percent gain. The dollar slipped against 14 of 16 major peers, while 10-year Treasury yields were little changed at 2.54 percent.
German investor confidence unexpectedly dropped in July, data from the ZEW Center for European Economic Research showed. Goldman Sachs (GS:US) Group Inc. and Johnson & Johnson reported earnings that beat analysts’ estimates today, while Coca-Cola Co. slid after reporting a drop in profit. U.S. industrial production rose in June by the most in four months, signaling U.S. manufacturing is improving.
“Investors are trying to find excuses to take a little bit of breath,” said John Plassard, who helps oversee $28 billion as vice president at Mirabaud Securities LLP in Geneva. “People are waiting for the two days of testimony from Bernanke and that could be a good excuse to take a little bit of profit.”
Europe Retreat
The Stoxx 600 erased an earlier advance of 0.1 percent as travel, media and telecommunications shares helped lead losses. Telecom Italia SpA (TIT) slid as much as 4.1 percent to a 16-year low in Milan after putting a plan to spin off its fixed-line assets on hold.
In the U.S., about 74 percent of the S&P 500’s companies that have reported earnings so far have beaten analyst forecasts, data compiled by Bloomberg show. Goldman Sachs, the world’s most profitable securities firm before the financial crisis, slipped 1.2 percent even after earnings beat estimates.
Coca-Cola lost 2 percent after unseasonable weather and slowing economic growth restrained sales around the globe. Johnson & Johnson climbed 0.2 percent after its earnings more than doubled in the second quarter after it sold its stake in Elan Corp. and the company boosted its profit forecast.
The U.S. earnings season “seems to have started off quite well, and we need the fundamentals to come through to support where prices have gone over the past year,” said Keith Poore, head of investment strategy at AMP Capital Investors Ltd. in Wellington, which manages more than $130 billion.
CPI, ZEW
The consumer-price index in the U.S. increased 0.5 percent after a 0.1 percent gain the prior month, Labor Department figures showed today. The median forecast in a Bloomberg survey called for a 0.3 percent rise. The biggest advance in gasoline prices in four months accounted for about two-thirds of the gain in the CPI. The core measure, which excludes food and fuel, rose 0.2 percent, matching the May gain and the survey median.
Another report from the Fed showed output at factories, mines and utilities climbed 0.3 percent, the biggest advance since February, after being little changed in May. The gain matched the median forecast of 86 economists in a survey. Manufacturing, which makes up 75 percent of total output, increased more than projected.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, fell to 36.3 from 38.5 in June. That’s the first decline in three months. Economists forecast a gain to 40, according to the median of 37 estimates in a Bloomberg News survey.
Emerging Markets
The MSCI Emerging Markets Index rose less than 0.1 percent for a sixth straight gain, its longest rally since January. India’s Sensex index slid 0.9 percent while the rupee jumped 1.1 percent, leading gains in developing-nation currencies, after the central bank raised two interest rates. The Shanghai Composite Index added 0.3 percent and Russia’s Micex Index advanced 0.5 percent.
The dollar declined 0.5 percent to 99.40 yen. The U.S. currency slid 0.5 percent to $1.3130 per euro.
Australia’s dollar climbed against all 16 of its major peers as investors pared bets the Reserve Bank will cut borrowing costs after the minutes of its most recent meeting were released today.
Cocoa, soybeans, coffee and wheat rose at least 1 percent to lead gains in 19 of the 24 commodities tracked by the S&P GSCI.
Copper climbed 1.3 percent to $7,010 a metric ton, the first gain in three days. West Texas Intermediate crude oil was little changed around $106 a barrel.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
