BLBG: U.S. Index Futures Drop as Yen Rises With Emerging Stocks
Standard & Poor’s 500 Index futures signaled the gauge will decline from a record high, European credit risk rose for the first time in eight days and the yen strengthened. Emerging-market stocks advanced with Chinese equities and oil gained for a third day.
S&P 500 futures lost 0.2 percent by 6:46 a.m. in New York, while the Stoxx Europe 600 Index added 0.2 percent. The MSCI Emerging Markets Index headed for a 13-month high. Corporate bond risk increased from a more than six-year low. The yen rose against all of its 16 major peers and the euro weakened 0.4 percent to $1.3543. West Texas Intermediate crude climbed 0.2 percent and palladium jumped to a three-year high.
The value of global equities rose by more than $2 trillion in the past month to $64.8 trillion yesterday, the highest since at least 2003, amid signs the U.S. recovery is gathering strength and a pickup in deal activity. Interest-rate cuts by the European Central Bank helped send yields on bonds from Italy to Ireland to record lows. The People’s Bank of China announced a reduction in reserve requirements for some banks yesterday as it acts to bolster growth.
“The bulls have clearly been in the lead,” Francois Savary, who helps oversee about $9.5 billion as chief investment officer at Reyl & Cie., said by phone from Geneva. “But even with improving economic data, I think that the U.S. market may have gone too far too fast, and I don’t see too much potential from here. I would pull out of U.S. equities and go into emerging markets.”
European Stocks
The MSCI Emerging Markets Index (MXAP) added 0.5 percent, poised for the highest close since May 9, 2013. The gauge trades at 11 times estimated 12-month earnings, compared with a multiple of 15.7 for the S&P 500, according to data compiled by Bloomberg.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong and the Shanghai Composite Index both jumped 1.1 percent. China’s central bank yesterday announced a 0.5 percentage point cut in reserve requirements for some banks, giving details of a policy move aimed at supporting smaller companies and agriculture. The change will take effect June 16, the People’s Bank of China said in a statement on its website yesterday.
Russia’s ruble slipped 0.1 percent against the dollar, after a four-day advance, and the Micex index was little changed. The Ukrainian Equities Index gained 1.1 percent and the hryvnia jumped 1.2 percent.
Ukraine Talks
Ukraine and Russia failed to reach an agreement on natural gas deliveries during overnight negotiations hosted by the European Union as prices remain the key sticking point. Talks may resume today at 9 p.m. central European time or tomorrow morning, EU Energy Commissioner Guenther Oettinger told reporters in Brussels after the meeting, which lasted more than seven hours.
Three shares fell for every two that rose in Europe’s Stoxx 600. Bank of Ireland Plc dropped 4.2 percent after U.S. billionaire Wilbur Ross put on sale his remaining shares in the country’s largest lender by assets. Gemalto NV climbed 2.9 percent after saying China Telecom Corp. chose it as a supplier of chips that enable contactless payments via mobile phones.
The yen advanced for the first time in three days against the dollar before a Bank of Japan meeting this week, while a gauge of expected price swings for the currency pair remained near a record low and trading in Japanese government debt almost ground to a standstill.
The yen added 0.2 percent to 102.30 per dollar. One-month implied volatility was at 5.44 percent after touching a record 5.25 percent yesterday. Japan’s currency strengthened 0.4 percent to 138.76 per euro.
No Trades
Japan’s 10-year cash bond and 20-year note futures resumed trading in the afternoon after neither security changed hands in the morning sessions. The benchmark 10-year note had no trade all day on April 14 for the first time since December 2000.
Three-year U.S. Treasury yields were near the highest level in a month before the U.S. auctions 2017 debt today. The rate was at 0.864 percent, after touching 0.867 percent yesterday, the highest since May 13.
Benchmark 10-year yields were 2.63 percent. The extra yield investors demanded to own the notes instead of their Group of Seven counterparts climbed to 71.5 basis points, the most since April 2010.
The cost of insuring against losses on corporate debt rose, with the Market iTraxx Europe index of credit-default swaps on 125 investment grade companies adding one basis point to 57 basis points, up from the lowest since January 2008.
Oil Gains
WTI oil increased to $104.67 a barrel after jumping 1.7 percent yesterday. Crude stockpiles probably fell 1.5 million barrels last week, according to a Bloomberg News survey before data from the Energy Information Administration tomorrow. The U.S. is the biggest oil consumer.
Palladium climbed as much as 0.7 percent to $849.25 an ounce, the highest since February 2011. Platinum gained 1.1 percent. Negotiations to end a 20-week pay strike at platinum and palladium mines in South Africa ended yesterday without an agreement. South Africa is the biggest producer of platinum and second-biggest in palladium. Both metals are used in catalytic converters to cut automobile emissions.
(An earlier version of this story was corrected to reflect Intercontinental Exchange Inc.’s new company name.)
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editors responsible for this story: Stephen Kirkland at skirkland@bloomberg.net Claudia Carpenter
