BS: Treasuries Rise as U.S. Stocks Fluctuate; Europe Slumps
Treasuries rose and U.S. stocks fluctuated before data on home sales, while emerging markets rebounded amid easing tension in Ukraine. European shares fell after German business confidence declined.
The Standard & Poor’s 500 Index lost 0.1 percent at 9:50 a.m. in New York. The Stoxx Europe 600 Index slid 0.3 percent. The MSCI Emerging Markets Index climbed 0.7 percent. Treasury 10-year yields fell three basis points to 2.60 percent. Dubai’s benchmark gauge tumbled 6.7 percent after entering a bear market yesterday. The pound depreciated against 12 of its 16 major peers after Bank of England Governor Mark Carney said wage data had been softer than expected.
Federal Reserve Bank of Philadelphia President Charles Plosser said he’s “fairly optimistic” economic growth will top 2.4 percent for the remainder of this year and next. German business confidence dropped more than estimated in June amid signs of slower growth in Europe’s largest economy, the Ifo institute reported. Russian stocks rose as President Vladimir Putin asked lawmakers to cancel the right to use force in Ukraine.
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“It makes sense to take a breather with high valuations, tension in Iraq, and people still waiting to see whether economic growth and U.S. companies have recovered from a weak first quarter,” said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank AG in Bonn, Germany. “There may be a bit more nervousness, but markets have been quite stable and volatility remains very low.”
The S&P 500 is up 8.1 percent since a low on April 11 as data showed the economy is recovering from extreme weather and the first drop in first-quarter gross domestic product since 2011. The government’s third revision to the GDP reading, due tomorrow, is expected to show a contraction of 1.8 percent, according to a Bloomberg survey of economists.
Economic Growth
Economic expansion will probably slow to a 2.4 percent trend rate after 2015, Plosser, who votes on monetary policy this year, said today in remarks prepared for a speech to the Economic Club of New York.
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Plosser and his colleagues on the Federal Open Market Committee on June 18 trimmed bond buying by $10 billion for the fifth straight meeting, to $35 billion per month, while reiterating that they plan to keep the main rate close to zero for a “considerable time” after ending the purchases. “The inflation rate appears to be firming,” Plosser said, predicting it will “stabilize” next year at about 2 percent, which is the FOMC’s target.
Chair Janet Yellen, speaking at a news conference after the FOMC decision, dismissed concern about accelerating inflation, calling recent data on prices “noise.”
Consumer Confidence
Data at 10 a.m. New York time may show the Conference Board’s consumer confidence index increased to 83.5 this month from 83, according to a Bloomberg survey of economists.
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A separate report may show that new-home sales in the U.S. increased in May. Home prices in 20 U.S. cities rose at a slower pace than forecast in the year ended in April, according to the S&P/Case-Shiller index of property values.
The U.S. equities market is experiencing its smallest swings of the year. The S&P 500 moved 0.25 percentage point from its highest and lowest levels yesterday. That followed a swing of 0.24 point on June 20, the narrowest movement in more than 20 years besides a 0.20 point reading in December. The Chicago Board Options Exchange Volatility Index, or VIX, a measure of S&P 500 options prices, closed at 10.98 yesterday, near its lowest level since 2007.
European Stocks
Two shares declined for every one that gained in the Stoxx 600, with trading volumes 5.7 percent above the 30-day average, according to data compiled by Bloomberg. All but five of the 19 industry groups dropped.
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The Ifo institute’s business climate index, based on a survey of 7,000 executives, declined to 109.7 in June from 110.4 in May. Economists predicted a drop to 110.3, according to the median of 40 estimates in a Bloomberg News survey.
“The fall in the Ifo is a signal that the eurozone’s growth engine is slowing down,” said Witold Bahrke, who helps oversee $55 billion as a senior strategist at PFA Asset Management in Copenhagen. “German businesses as of now are quite unimpressed by measures taken by the European Central Bank.”
The euro area is struggling to sustain a recovery that received a bleak assessment from the International Monetary Fund June 20. Earlier this month, the European Central Bank introduced a negative deposit rate, announced targeted loans to stimulate lending and held out the prospect of asset purchases to stoke growth and inflation in the 18-nation region.
