BLBG : Stocks Retreat as Copper, Oil Decline; European Bonds Advance
The MSCI World stock index fell for a second day, commodities retreated and bonds advanced as a lower-than-estimated reading of German business confidence undermined speculation that the global recovery will be robust.
The MSCI World gauge of 23 developed nations slipped 0.1 percent at 12:27 p.m. in London. Copper declined for a second day on the London Metal Exchange and oil dropped. German bunds advanced, sending the yield down 4 basis points for its biggest decline since Sept. 11.
The Federal Reserve signaled at the conclusion of its two- day policy meeting yesterday that the U.S. economy isn’t growing enough for stimulus measures to end. Leaders from the Group of 20 nations meeting in Pittsburgh today will grapple with how to pay off $9 trillion spent combating the deepest financial slump since the Great Depression. The Ifo institute in Munich said its business climate index rose to 91.3, less than the 92 level predicted in a Bloomberg survey of 40 economists.
“The Fed’s statement is a burden on the equities and currencies today,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “Markets are reacting strongly to it on concerns that the recovery is not that robust.”
Retailers led the decline in the Dow Jones Stoxx 600 Index of European shares, which slid 0.9 percent. A 54 percent increase since March 9 has driven valuations on the gauge to 47.5 times reported profit, the highest level since 2003, weekly Bloomberg data show.
H&M, U.S. Futures
Hennes & Mauritz AB sank 3.2 percent in Stockholm after Europe’s second-largest clothing retailer posted earnings that trailed analyst estimates. Revenue at stores open at least a year fell 11 percent in August, the fourth consecutive drop and worse than July’s 3 percent decrease.
Futures on the Standard & Poor’s 500 Index slipped less than 0.1 percent, indicating the benchmark gauge for U.S. equities may drop for a second day after reaching the highest level in almost a year. The S&P 500’s 57 percent rebound from its 12-year low on March 9 has pushed valuations to almost 20 times the reported earnings of its companies, the highest level since 2004, according to weekly Bloomberg.
U.S. stocks have rallied for six months as the Fed held interest rates near zero percent and the G-20 committed about $12 trillion to revive global growth. The U.S. central bank changed the wording in the final paragraph of its statement yesterday to say it will continue to employ a “wide range of tools” to bolster the economy. In its August statement, it said it would use “all available” tools.
‘Hesitant’
“People have their doubts and they continue to take the view that any recovery will be hesitant,” said Russell Jones, head of fixed-income and currency research in London at RBC Capital Markets.
The MSCI Emerging Markets Index dropped for a second day, losing 0.7 percent.
Copper slid 0.8 percent on the LME, while nickel tumbled 1.6 percent. Agricultural commodities also fell. Refined sugar dropped 2.8 percent in London, while corn slipped for the first time in three days, losing 2 percent.
Crude oil futures dropped as much as 1.4 percent to $68.02 a barrel in New York after a U.S. government report yesterday showed a larger-than-expected increase in fuel stockpiles.
European bonds rose after Germany cut its fourth-quarter debt-sale program, citing “improved funding conditions. Yields on the French and Dutch 10-year notes dropped 4 basis points to 3.59 percent and 3.56 percent, respectively.
Treasuries, Yen
Treasuries were little changed, with the 10-year note yield at 3.41 percent as the government prepares to sell $29 billion of five-year notes today, the last of three auctions this week that will raise $112 billion.
The yen advanced against 15 of the 16 most-traded currencies tracked by Bloomberg, gaining 0.7 percent versus the dollar and 0.5 percent compared with the euro, amid speculation Japanese companies returning from a three-day holiday will repatriate funds before the end of the fiscal first half.
The pound weakened 1.1 percent against the euro on concern the Bank of England will cut the rate it pays financial institutions on deposits. The U.K. currency dropped 1.5 percent against the yen and 0.9 percent the dollar.
To contact the reporters on this story: Daniel Hauck in London at
