BLBG: Yen, Bonds Advance as Central Banks Weigh Withdrawing Stimulus
By Justin Carrigan
Sept. 25 (Bloomberg) -- The yen and government bonds gained as central banks weighed withdrawing economic-stimulus measures that have helped buoy demand for riskier assets.
The Japanese currency rose against all 16 of its most- traded peers tracked by Bloomberg, strengthening to less than 90 per dollar, as of 11:26 a.m. in London. European bonds advanced, driving the yield on the German 10-year bund to the lowest level in almost two weeks. The Dow Jones Stoxx 600 Index of European shares added 0.2 percent after falling as much as 0.5 percent earlier. U.S. index futures climbed 0.4 percent.
Group of 20 leaders are meeting in Pittsburgh to discuss policy coordination and tighter banking regulation. Federal Reserve Governor Kevin Warsh said the U.S. may need to be as aggressive in reversing its actions to revive the economy as it was in starting. European Central Bank policy maker Yves Mersch said “timely preparation” is needed about when to raise rates and withdraw liquidity once money markets recover.
“If the world starts to believe that we are moving on from crisis management mode, the market could get sensitive about the timing of the retreat from the abnormal level of intervention,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a report.
The yen climbed 1.2 percent to trade as high as 89.97 per dollar, the first time it has breached 90 against the U.S. currency since Feb. 12. It advanced 1.5 percent against the pound and 1 percent compared with the euro. The pound fell against all 16 most-traded currencies.
Gilts Lead Gains
U.K. gilts led gains in government bonds, with the yield on the 10-year note dropping 3 basis points to 3.67 percent. The yield on the German 10-year bund declined 2 basis points to 3.28 percent, while the U.S. 10-year note yield fell 1 basis point to 3.37 percent.
The U.S. government and the Fed have spent, lent or committed more than $12 trillion in an effort to revive the economy and credit markets. Germany yesterday reduced its fourth-quarter debt-sale program, citing “improved funding conditions.”
The gains in U.S. futures indicated the Standard & Poor’s 500 Index will trim its weekly decline of 1.6 percent. A report today from the Commerce Department may show orders for U.S. durable goods rose in August for the fourth time in the past five months, economists said. New-home sales probably rose 1.6 percent to a 440,000 rate, a separate report may show.
Sara Lee
Sara Lee Corp. gained 7.7 percent in Germany. Unilever, the maker of Dove soap, agreed to buy Sara Lee’s personal-care and European detergent unit for 1.28 billion euros ($1.88 billion). Sara Lee, which has been selling businesses to focus on coffee and food, said the proceeds would help it buy back up to $1 billion in stock. Unilever slipped 0.7 percent in Amsterdam.
Research In Motion Ltd. sank 12 percent in pre-market New York trading. The company forecast third-quarter sales that fell short of analysts’ projections, a sign the BlackBerry maker may have to sell more phones at lower prices to compete with Apple Inc.’s iPhone.
Today’s advance trimmed the decline for Europe’s Stoxx 600 since Sept. 18 to 1.9 percent. Europe’s regional gauge has retreated this week as the index traded at 49.5 times the earnings of its companies, the most expensive level since 2003.
The MSCI Asia Pacific Index slid 1 percent. Nomura Holdings Inc., Japan’s largest brokerage, tumbled 16 percent, the steepest one-day decline since at least 1974, after announcing a record 511.3 billion yen ($5.6 billion) share sale to fund expansion abroad.
Warsh Opinion
“If ‘whatever it takes’ was appropriate to arrest the panic, the refrain might turn out to be equally necessary at a stage during the recovery to ensure the Federal Reserve’s institutional credibility,” Warsh wrote in an opinion piece posted late yesterday on the Wall Street Journal’s Web site.
The MSCI Emerging Markets Index slid 0.2 percent. Turkey’s benchmark ISE National 100 Index retreated 1.1 percent, led by a 6.6 drop in Dogan Yayin Holding AS after the tax office requested the country’s biggest media group provide 4.8 billion liras ($3.2 billion) in collateral within 15 days to cover alleged back-taxes, fines and interest. Poland’s zloty led emerging-market currency declines, weakening 0.7 percent to the lowest level in two months against the euro.
Crude oil for November delivery climbed 37 cents, or 0.6 percent, to $66.26 a barrel on the New York Mercantile Exchange, after tumbling more than 8 percent during the previous two days on larger-than-expected increases in U.S. fuel stockpiles.
European Union carbon permits rose, snapping a three-day decline, after the European Commission yesterday pledged to prevent extra supply of credits following a court ruling earlier this week overturning pollution limits on Poland and Estonia. EU December permits added 2.7 percent to 13.13 euros a metric ton on London’s European Climate Exchange.
Tin climbed the most among industrial metals on the London Metal Exchange, rallying 0.9 percent to $14,500 a metric ton. Copper added 0.7 percent to $6,000 a ton. Aluminum slid 0.7 percent to $1,827 a metric ton, almost a two-week low.
