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German bond yields rose from almost all-time lows as Moody’s Investors Service cut the outlook on the nation’s Aaa rating. U.S. stocks swung between gains and losses, while corn, soybeans and wheat declined.
The yield on the 10-year bund, Europe’s benchmark debt security, climbed eight basis points to 1.25 percent by 9:40 a.m. in New York after matching the record low of 1.127 percent yesterday. The Standard & Poor’s 500 Index slipped 0.2 percent after earlier rising less than 0.1 percent. The euro depreciated for a fifth day against the yen. S&P’s GSCI gauge of 24 raw materials fell 0.2 percent.
Moody’s lowered the outlooks on the Aaa credit ratings of Germany, the Netherlands and Luxembourg yesterday, citing the “rising uncertainty” about Europe’s debt crisis. UPS, the world’s largest package-delivery company, slumped after cutting its full-year forecast as quarterly profit trailed analysts’ estimates amid cooling international growth.
“Europe’s recession is deepening and spreading to the core, including Germany,” said Kit Juckes, head of currency research at Societe Generale SA in London. “For investors, fearful of downgrades even to core debt, the path of least resistance will be to look outside Europe and hope that the U.S. data is a little stronger.”
Moody’s left Finland as the only country in the 17-nation euro region with a stable outlook for its top ranking. Chancellor Angela Merkel’s government said Germany will remain Europe’s haven during the financial crisis, pushing back against Moody’s decision. The risks in the euro zone are “not new” and Germany remains “in a very sound economic and financial situation,” the Finance Ministry said.
Italy’s 10-year bonds fell for a third day after a report showed services and manufacturing in the euro region shrank in July. Government debt from the Netherlands dropped as its outlook was also lowered by Moody’s.
The euro weakened 0.4 percent to 94.66 yen and traded at $1.2108. The Japanese currency rose versus most major peers as investors sought safety even as the nation’s government said it’s ready to combat its strength.
UPS slid 2.2 percent. The company is considered an economic bellwether because it moves goods ranging from financial documents to pharmaceuticals and industrial parts. International Package sales dropped 4 percent and Supply Chain & Freight revenue declined 1.6 percent as excess capacity for Asian exports pressed pricing, UPS said.
Investors watched second-quarter corporate results. Sales rose an average 2.9 percent in the second quarter among 146 companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Only 40 percent of the reported companies have topped analysts’ estimates on sales, while 73 percent have beaten on profit, the data show.
Apple Inc. (AAPL), the world’s largest company by market value, is among 41 members of the S&P 500 due to report earnings today.
The Stoxx 600 rose less than 0.1 percent. Elan Corp. sank 12 percent in Dublin after an experimental Alzheimer’s treatment developed with Pfizer Inc. and Johnson & Johnson failed to improve symptoms of dementia in a study.
The two-day selloff in equities pushed bets that the Chicago Board Options Exchange Volatility Index will keep rising to the most in a year. The ratio of outstanding calls to buy the VIX jumped to 2-to-1 on July 20, according to data compiled by Bloomberg. The gauge climbed 21 percent from July 20 to 18.62 yesterday, the biggest two-day increase since April, as the S&P 500 slipped 1.9 percent.
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