Bloomberg News

Euro Rises Ahead of Europe Meetings; Stocks Decline

September 04, 2012

Asian Stocks Fall on Moody’s; Aussie Drops, Soybeans Hit Record

Data today may indicate U.S. factory activity teetered between growing and shrinking. Reports yesterday showed euro-area and Chinese manufacturing contracted. Photographer: Tomohiro Ohsumi/Bloomberg

The euro traded near a two-month high against the dollar before the region’s leaders hold talks to address the debt crisis, while European stocks and copper fell ahead of U.S. factory data. Soybeans rose to a record.

The euro strengthened 0.2 percent versus the greenback at 8:24 a.m. in London. The Stoxx Europe 600 Index lost 0.4 percent. Futures on the Standard & Poor’s 500 Index added 0.1 percent, after U.S. markets were closed yesterday for a holiday. Spain’s two-year note yield slid to the least on record compared to the rate on its 10-year securities. Soybeans advanced 1.7 percent in Chicago on their first trading day this week, while corn and wheat also rallied. Copper slipped.

European leaders are stepping up diplomatic efforts this week as they await a policy meeting of the region’s central bank on Sept. 6. European Central Bank President Mario Draghi told officials yesterday he would be comfortable buying three-year government bonds to bring down borrowing costs for nations in financial distress. Data today may indicate U.S. factory activity teetered between growing and shrinking.

The ECB “is more likely to trigger action when they meet” in two days, said Matthew Sherwood, Sydney-based head of markets research at Perpetual Investments, which manages about $25 billion. “Whether it’s comprehensive enough to keep sentiment strong and keep markets rallying is a different issue because in the end there’s not much central banks can do to address the global debt situation.”

Draghi Comments

The euro strengthened 0.2 percent to $1.2613, after it reached $1.2638 on Aug. 31, the highest since July 2. The shared currency advanced 0.4 percent to 98.93 yen. The European Union’s debt-rating outlook was earlier cut to negative by Moody’s Investors Service.

EU President Herman Van Rompuy is traveling to Berlin for talks with German Chancellor Angela Merkel today as Italian Prime Minister Mario Monti welcomes French President Francois Hollande to Rome. Draghi may give more details on the bank’s bond buying plans when he holds his first press conference after the summer break on Sept. 6.

The yield difference, or spread, between Spain’s two-year and 10-year securities widened to as much as 343 basis points, the most since Bloomberg began collecting the data in 1993.

In the U.S., the Institute for Supply Management’s manufacturing index was probably at 50 in August, according to the median estimate of economists surveyed by Bloomberg News. It was at 49.8 in July, below the level of 50 that marks the dividing line between expansion and contraction.

Chinese Profits

The MSCI Asia Pacific Index dropped 0.3 percent. The Hang Seng China Enterprises Index (HSCEI) slumped 0.8 percent toward a six- week low in Hong Kong after Goldman Sachs Group Inc. cut its earnings growth estimates for Chinese listed companies, while the Shanghai Composite Index declined 0.8 percent to its lowest level since February 2009.

The S&P/ASX 200 fell 0.6 percent. The Reserve Bank of Australia’s Governor Glenn Stevens and his board left the overnight cash-rate target at 3.5 percent today. Domestic demand is weathering a global slowdown that’s driving down the price of iron ore, the nation’s biggest commodity export.

Fortescue Metals Group Ltd. (FMG), Australia’s third-biggest iron-ore producer, plunged 4.2 percent after cutting its full- year capital spending forecast by 26 percent.

U.S. Drought

Soybeans for delivery in November gained 1.7 percent to $17.8675 a bushel on the Chicago Board of Trade after a one-day break. Soybeans have rallied 48 percent this year as the worst U.S. drought in more than a half a century hurt yields. That’s the biggest gain on the Standard & Poor’s GSCI Spot Index of 24 raw materials. Corn gained 1 percent to $8.0775 a bushel, and wheat advanced 1 percent to $8.98 a bushel.

Domestic soybean prices in China, the largest importer advanced this week to the highest level since 2008, on concern that supplies from the U.S., the biggest grower, will decline. The oilseed is crushed to make animal feed and cooking oil in the world’s most populous nation.

The metal for delivery in three months lost as much as 0.5 percent to $7,640 a metric ton on the London Metal Exchange. Zinc also dropped 0.3 percent, while tin retreated 1 percent.

To contact the reporters on this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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