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Crops led a rally in commodities, with corn reaching a 10-month high and soybeans reaching the priciest since 2008, as the worst drought in a generation parches American farms. U.S stocks fell and Treasuries gained amid concern the global economic recovery is weakening.
Corn futures for December delivery jumped 4.4 percent to $7.725 a bushel in Chicago while November soybeans climbed 2.4 percent and soybean-meal futures touched an all-time high. Wheat jumped 4.3 percent to a 17-month high. Oil surged 1.5 percent to $88.43 a barrel and shares of energy producers rose, helping limit the drop in the Standard & Poor’s 500 Index to 0.2 percent. Government debt yields slid to records from the U.S. and Canada to Germany, France and the U.K. amid demand for assets considered most safe.
Crops surged amid forecasts that most of the U.S. Midwest will be unusually dry and hot in the next 10 days, threatening to drive food prices to record highs. T-Storm Weather LLC in Chicago said July is on pace to rank as the third driest and warmest in 118 years of data. Gains in Treasuries and losses in stocks followed a reduction in the International Monetary Fund’s forecast for global growth in 2013 and an unexpected decrease in U.S. retail sales.
“The crops are shrinking daily, and the market is pricing in the risk for less available supply for export and domestic usage,” Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana, said in a telephone interview. “The path of least resistance is for higher prices until the crops get enough rain to stabilize yields.”
The S&P GSCI Index climbed 1.6 percent as 15 of 24 commodities increased. Rallies in corn, wheat, soybeans and soybean meal, used in animal feed, may mean higher food prices after the Food & Agriculture Organization’s world food index dropped for three consecutive months through June. Corn is up 23 percent this year and soybeans climbed 32 percent. Soybean meal prices have jumped 48 percent this year and today rose to $463.80 for 2,000 pounds.
After U.S. financial markets closed, the Department of Agriculture reported that the condition of the corn crop worsened for a sixth straight week, the longest such streak since 2003. About 31 percent of the corn was in good or excellent condition as of yesterday, down from 40 percent a week earlier, the USDA said in a report. An estimated 34 percent of the soybeans got the top ratings, down from 40 percent. The ratings are the worst for both crops for this time of year since a drought in 1988.
U.S. Treasury five-year note yields slid as low as 0.577 percent, rates on Canada’s 10-year debt reached 1.5952 percent and German two-year yields sank to minus 0.06 percent.
The rate on Germany’s two-year note was the least since Bloomberg began collecting the data in 1990. Rates on similar- maturity French and Dutch bonds reached as low as 0.07 percent and minus 0.0279 percent, respectively, also records. France’s five-year debt yield dropped 10 basis points to a record 0.828 percent. Five-year U.K. yields reached an all-time low of 0.53 percent.
“Investors are not really concerned about returns, they just want to know they will get their money back,” said Gianluca Ziglio, an interest-rate strategist at UBS AG in London. “The market is still concerned about the euro-region situation. There is risk aversion and ongoing fear about the crisis escalating, which means investors will continue to focus on bonds from the core countries.”
Germany’s top court said it won’t rule on whether to suspend the euro-area’s bailout fund and fiscal pact until Sept. 12, more than two months after it held a hearing on the measures. The European Central Bank advocated imposing losses on senior bondholders of the most damaged Spanish banks, the Wall Street Journal said, citing people familiar with the discussions. Reports today showed inflation in the euro region held at the lowest since February 2011 last month and imports fell in May.
After the close of markets in New York, Moody’s Investors Service cut the long-term debt and deposit ratings for 10 Italian banks and issuer ratings for three Italian financial institutions. The cuts follow a downgrade of Italy to Baa2 last week.
The International Monetary Fund lowered its 2013 forecast for global economic growth to 3.9 percent from 4.1 percent as Europe’s debt crisis prolongs Spain’s recession and slows expansions in emerging markets from China to India. An unexpected third straight monthly drop in U.S. retail sales showed that limited employment gains are taking a toll on the biggest part of the economy.
The S&P 500 fell for the seventh time in eight days, retreating after a 1.7 percent rally on July 13. Industrial and consumer-discretionary shares retreated 0.6 percent to lead declines in seven of the 10 main industry groups. Energy shares advanced 0.3 percent. as crude oil reversed an earlier drop.
General Electric Co. fell 0.9 percent after Morgan Stanley reduced its recommendation on the stock, citing valuations. Arch Coal Inc. and Alpha Natural Resources Inc. declined 3.9 percent and 10 percent, respectively, as Bank of Montreal cut its ratings, citing potential financing issues. Visa Inc. and MasterCard Inc. climbed at least 1.7 percent after agreeing to a settlement of at least $6.05 billion in a price-fixing case brought by retailers (S5RETL) over credit-card swipe fees.
Retailers in the S&P 500 lost 0.8 percent. Retail sales in the U.S. fell 0.5 percent in June, compared with the median projection of a 0.2 percent increase in a Bloomberg survey, Commerce Department figures showed. The decrease overshadowed stronger-than-forecast growth in a gauge of New York manufacturing. The Federal Reserve Bank of New York’s general economic index rose to 7.4 from 2.3 in June. The median forecast of economists called for an increase to 4.0.
The S&P 500 is down almost 5 percent from a four-year high in April as economic data trails forecasts and investors brace for what is projected to be the first decrease in quarterly earnings since 2009. The Citigroup Economic Surprise Index for the U.S., which measures how much data from the past three months is beating or missing the median estimates in Bloomberg surveys, was at minus 64 today, near the almost 11-month low of minus 64.9 reached last week.
The dollar weakened against 13 of 16 major peers, losing the most against the South African rand, Mexican peso and Japanese yen. The euro strengthened versus eight of 16 major peers, reversing earlier declines against the dollar to rise 0.2 percent to $1.2275.
More than three shares gained for every two that fell in the Stoxx Europe 600 Index, sending the gauge up 0.2 percent. SEB AB, the Swedish bank that’s the second-largest lender in the Baltic countries, jumped 8.2 percent after earnings topped estimates. G4S Plc tumbled 8.7 percent as the world’s biggest security company said it may incur a 50 million-pound ($78 million) loss after failing to provide enough guards for the Olympic Games.
The MSCI Emerging Markets Index advanced 0.2 percent as benchmark gauges in Mexico and Hungary rose more than 1 percent. The Shanghai Composite Index fell 1.7 percent to the lowest level since March 2009 as concern about slumping profits overshadowed speculation the government will introduce stimulus measures for the economy. The Philippine Stock Exchange Index (PCOMP) advanced 1.6 percent, the most in a month, after the central bank signaled it may ease monetary policy further this year.
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