BLBG:Dollar Gains With European Stocks Before Bernanke Speaks
The dollar strengthened against the currencies of most of its main trading partners, while European stocks and U.S. index futures declined before Federal Reserve Chairman Ben S. Bernanke testifies to Congress. The pound rose and commodities dropped.
The Bloomberg Dollar Index added 0.2 percent at 11:02 a.m. in London, after dropping 0.7 percent yesterday. The British pound rose 0.3 percent and U.K. gilts declined. The yen fell against almost all of its major counterparts. The Stoxx Europe 600 Index decreased 0.5 percent after earlier rising as much as 0.3 percent and Standard & Poor’s 500 Index (SPX) futures slipped 0.3 percent. Oil dropped 0.5 percent, gasoline fell 1.2 percent and copper slid 0.9 percent.
“We are very constructive on the U.S. dollar for very fundamental reasons,” Deutsche Bank AG co-Chief Executive Officer Anshu Jain said in a Bloomberg Television interview, referring to the Fed’s monetary policy. “A combination of a U.S. which is re-industrializing, and a household which is starting to spend again, could presage a long, strong period for the U.S., which of course would be good for the dollar.”
Bernanke will appear before the House Financial Services Committee today and senators tomorrow to present the Fed’s semi-annual monetary policy report. The Bank of England minutes released today showed a unanimous vote to leave bond buying unchanged. Data today is forecast to show U.S. housing starts rose in June, according to a Bloomberg News survey.
The MSCI All-Country World Index posted the biggest five-day gain since November last week after Bernanke said monetary policy would remain accommodative for the “foreseeable future.”
L’Oreal Falls
About four shares declined for each that gained on the Stoxx 600 index, with trading volumes 19 percent lower than the 30-day average. BHP Billiton Ltd. advanced 1.2 percent as the world’s biggest mining company said fourth-quarter iron ore production climbed 17 percent. L’Oreal SA (OR), the largest cosmetics maker, fell 3.2 percent in Paris trading after second-quarter sales growth missed estimates.
The S&P 500 snapped an eight-day winning streak yesterday as Fed Bank of Kansas City President Esther George, who has voted against the central bank’s bond-buying program this year, told Fox Business Network that cuts to quantitative easing are appropriate as the U.S. economy gathers momentum.
Earnings Surprise
Some 21 companies, including Bank of America Corp. and EBay Inc., are due to release results today. Per-share earnings topped estimates at about 74 percent of S&P 500 members that have reported this month, data compiled by Bloomberg show.
“Everyone is watching the Fed and looking out for Bernanke’s comments on when the scaling back of stimulus will begin,” Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc., the largest bank by assets in the Philippines, said by phone. “The Fed will probably start reducing bond purchases in September, but some investors were not expecting it start until the end of the year.”
The yen slid 0.5 percent to 99.64 per dollar. The Bank of Japan said the economy is picking up and will resume a moderate recovery, according to minutes of its June meeting. It refrained from expanding operations to stem volatility in debt markets at its June meeting, surprising analysts and investors. An extension may cause misunderstanding, some members said, according to the meeting minutes. The euro weakened 0.1 percent to $1.3154.
Pound Strengthens
The pound rose to $1.5207 and the yield on 10-year gilts increased seven basis points to 2.33 percent. U.K. unemployment claims fell at their fastest pace in three years in June, adding to evidence the economic recovery is gaining momentum. Jobless claims fell 21,200 from May to 1.48 million, the biggest drop since June 2010, the Office for National Statistics in London said today.
Treasuries fell, with the 10-year yield rising one basis point to 2.55 percent.
The S&P GSCI gauge of 24 commodities slipped 0.4 percent. West Texas Intermediate oil fell to $105.50 a barrel and gasoline dropped to $3.0962 a gallon. Copper declined to $6,935 a metric ton.
The cost of insuring against losses on corporate bonds increased, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies adding 1.2 basis points to 107.6. The index typically falls as investor confidence improves and rises as it deteriorates.
To contact the reporters on this story: Shelley Smith in London at ssmith118@bloomberg.net
To contact the editor responsible for this story: Mark Gilbert at magilbert@bloomberg.net
