BLBG: Dollar Gains With Europe Stocks as Bonds, Gold Retreat
The dollar strengthened, reaching a seven-month high against the yen, and government bonds declined before data that analysts forecast will show expansion in U.S. manufacturing. European stocks rose and gold declined.
The dollar climbed 0.5 percent to 104.90 yen at 10:53 a.m. in London and added 0.5 percent to $1.653 per British pound. Yields on 10-year Treasury notes increased four basis points to 2.38 percent. The Stoxx Europe 600 Index advanced 0.3 percent for a third day of gains. Futures on the Standard & Poor’s 500 Index added 0.2 percent after the index rallied the most since February last month. Gold dropped 0.7 percent.
U.S. investors return after the Labor Day break with manufacturing and construction spending reports. Gauges of factory output in Europe and China signal slower growth, boosting speculation that policy makers will need to boost stimulus measures. European money markets are pricing in about a 50 percent probability that the European Central Bank will cut interest rates by 10 basis points this week, according to BNP Paribas SA.
“In the U.S. across the board we have had strong data,”said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “That will keep growth momentum going. We have had a positive dollar trend for the past two months. I find it difficult to see this trend is going to disappear in the short term.”
U.S. Reports
The Institute for Supply Management’s August factory gauge probably held last month near the highest since April 2011, according to the median of 70 estimates in a Bloomberg survey. Another report probably will show U.S. construction rebounded in July, a Bloomberg survey showed. Reports yesterday signaled manufacturing slowed in China, the U.K. and the euro area.
The yen fell to its lowest level against the dollar since Jan. 16 amid speculation Japan’s Prime Minister Shinzo Abe will appoint an ally to head the ministry in charge of reforming the Government Pension Investment Fund, potentially boosting investment overseas. The currency weakened to 105.44 on Jan. 2, a level not seen since October 2008.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, climbed 0.2 percent to 1,032.33 and touched 1,032.98, the strongest since January.
The pound weakened after a YouGov Plc poll showed growing support for Scottish independence before this month’s referendum. One-month implied volatility on sterling versus the dollar jumped to the highest level since April.
Government Bonds
European government bonds fell with Treasuries, as Germany’s 10-year yield increased three basis points to 0.91 percent and Spain’s rose one basis point to 2.27 percent.
The euro overnight index average, or Eonia, which measures the cost of lending between euro-area banks, fell to a record minus 0.013 percent yesterday.
Corporate borrowing costs fell to a record in Europe, with the average yield demanded to hold investment-grade bonds in euros dropping to 1.28 percent, according to Bank of America Merrill Lynch index data. The gauge declined 19 basis points in the past month on stimulus speculation.
The Stoxx 600 rose after increasing 0.5 percent in the past two days. Basic-resource companies led the rally among 19 industry groups.
Vallourec SA climbed 3.8 percent after UBS AG advised investors to buy shares of the French producer of steel pipes for the oil and gas industry. Weir Group Plc gained 3.1 percent after Credit Suisse Group AG raised its recommendation on the British supplier of pressure pumps to outperform from neutral.
Luxottica Departure
Luxottica Group SpA lost 1.6 percent. The world’s largest eyewear maker said yesterday that Andrea Guerra stepped down as chief executive officer after a decade. Founder Leonardo Del Vecchio said in an interview with Il Sole 24 Ore that plans to bring his children into the company’s management team led to Guerra’s exit.
Futures (SPX) on the S&P 500 expiring this month climbed after the index rallied 3.8 percent in August.
The MSCI Emerging Market Index fell for the first time in three days, losing 0.4 percent. Taiwan’s Taiex slid 1.2 percent the most in a month, and South Korea’s Kospi dropped 0.8 percent.
Samsung Electronics Co. led a decline in technology shares, falling 2.6 percent to a two-year low. Shinhan Investment Corp. predicted the company’s profit will drop 17 percent in the third quarter from the previous three-month period. Taiwan Semiconductor Manufacturing Co. retreated 2 percent.
China Data
The Shanghai Composite Index (SHCOMP) gained 1.4 percent, the most in three weeks to the highest close in almost a year. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose less than 0.1 percent. China will report services data tomorrow after an official gauge yesterday showed manufacturing slowed.
The ruble weakened 0.2 percent to 37.3875 per dollar after falling to a record 37.51 yesterday, while the Micex Index slipped 0.2 percent. Ukraine’s hryvnia fell 1.6 percent.
Ukraine warned of an escalating conflict in its easternmost regions, with U.S. President Barack Obama set to arrive today in eastern Europe. Ukraine’s army will take on Russia’s “full-scale invasion,” Defense Minister Valeriy Geletey said on Facebook, a shift away from the government’s earlier communication that focused on battling insurgents.
Gold dropped for a third day to $1,277.31 an ounce and copper advanced 0.3 percent to $6,961.25 a metric ton.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Claudia Carpenter in London at ccarpenter2@bloomberg.net
To contact the editors responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net Claudia Carpenter, Stephen Kirkland
