BS: European Shares Decline With Commodities Before Fed Meeting
European shares retreated after the biggest gain in two months and commodities declined before Federal Reserve policy makers start a two-day meeting. Emerging-market currencies weakened.
The Stoxx Europe 600 Index (XU100) declined 0.2 percent by 7:46 a.m. in New York after rising 1.3 percent yesterday, the most since Oct. 10. Standard & Poor’s 500 Index futures rose less than 0.1 percent. U.S. Treasury yields fell two basis points to 2.86 percent. Brent crude oil retreated 0.6 percent and the Turkish lira declined 0.6 percent. Corporate bond risk dropped for a third day.
The U.S. consumer price index probably rose in November, economists said before a Labor Department report today. That may influence the Fed’s decision on when to reduce its $85 billion monthly bond buying program. A gauge of German investor confidence increased more than economists expected in December.
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“Today’s CPI could still be a swing factor,” Jim Reid, a strategist at Deutsche Bank AG in London, said in a report. “The consensus still seems to be in favor of January or March for the first taper.”
Benchmark U.S. 10-year yields have risen from 1.76 percent at the start of the year. The Treasury is scheduled to sell $32 billion of two-year debt today in the first of four note auctions this week.
Government Securities
U.S. government securities due in a decade and longer have fallen more than 11 percent in 2013 to yesterday, the biggest loss among 144 debt indexes tracked by Bloomberg and the European Federation of Financial Analysts Societies.
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The Fed has kept its benchmark, the target for overnight loans between banks, at almost zero for five years. The odds of an increase by January 2015 are about 16 percent, based on data compiled by Bloomberg from futures (SPX) contracts. About 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted that the Fed will start paring stimulus when it concludes a two-day policy meeting tomorrow.
The dollar was little changed at 102.96 yen after touching 103.92 yen on Dec. 13, the strongest level since October 2008. It was also little changed at $1.3749 per euro. The 17-nation common currency traded at 141.55 yen.
Dollar Outlook
“The markets are waiting for the Fed yet the levels of U.S. rates and yields suggest that tapering is pretty much priced in,” said Kit Juckes, a global strategist at Societe Generale SA in London. “The dollar is unlikely to really get a lift until the focus shifts from tapering to the prospect of rate hikes, which is a lot further away.”
CGG SA (CGG) tumbled 15 percent in Paris after the world’s biggest seismic surveyor of oilfields cut its 2013 profit forecast. DKSH Holding Ltd. dropped 4.6 percent in Zurich after Credit Suisse Group AG cut its rating on the market-expansion services company.
Wirecard AG gained 3.2 percent in Frankfurt after Exane BNP Paribas raised its rating on the German maker of electronic-payment software. Zurich Insurance Group AG (ZURN) climbed 2 percent in Zurich as Swiss Re Ltd.’s Chief Financial Officer George Quinn quit to join Switzerland’s biggest insurer.
Boeing Co. (BA:US) climbed 3.3 percent in European trading after the planemaker boosted its quarterly dividend by 51 percent and authorized a $10 billion share-repurchase plan, the largest in its history.
Stocks Rally
Futures on the S&P 500 expiring in March climbed after the index rose 0.6 percent yesterday. The measure of U.S. stocks advanced 25 percent this year, heading for its biggest annual rally since 2003. The Stoxx 600 in Europe advanced 12 percent this year.
The ZEW Center for European Economic Research said that its index of investor and analyst expectations, which aims to predict economic developments six months in advance, jumped to 62.0 from 54.6 in November. Economists predicted an increase to 55.0, according to the median of 35 estimates in a Bloomberg News survey.
The MSCI Emerging Markets Index rose 0.2 percent, increasing for the first time in six days, with the the Philippine (PCOMP) Stock Exchange PSEi Index leading gains in Asia, increasing 2 percent.
Indonesia’s rupiah was set for its lowest level in five years as investors gauged the outlook for U.S. stimulus. The Turkish lira depreciated the most in a week after local media said that sons of the economy and interior ministers and Halkbank’s chief executive officer were among those arrested as part of a corruption probe. The rupee slipped 0.3 percent. The lira, South African rand and Indian rupee are the worst performers today out of 24 emerging-nation currencies monitored by Bloomberg.
The Borsa Istanbul National 100 Index in Turkey dropped 2.3 percent, the steepest decline in two weeks.
Commodities Losers
The S&P GSCI gauge of 24 commodities dropped 0.3 percent, as Brent retreated to $108.54 a barrel and heating oil slipped 0.3 percent. Gold dropped 0.3 percent to $1,237.57 an ounce.
The Aussie dollar touched NZ$1.0786, the lowest since October 2008, as Australia forecast a wider budget deficit while New Zealand projected a bigger operating surplus.
In its mid-year economic forecast today, the Australian government said the budget deficit will increase to A$47 billion ($42 billion) in the year through June, from an August projection of A$30.1 billion. In contrast, New Zealand forecast an operating surplus of NZ$86 million ($71 million) in the year through June 2015, from a May projection of NZ$75 million, Finance Minister Bill English said in a fiscal update today.
The cost of insuring against losses on corporate bonds declined for a third day, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies decreasing 1.3 basis points to 77.3 basis points, the lowest since Nov. 27.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Claudia Carpenter in London at ccarpenter2@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net
