Bloomberg News

Treasuries Advance, Euro Slips as U.S. Stocks Climb

November 05, 2012

European Stocks Fall as Euro Weakens on Greece, U.S. Elections

Visitors sit and check stock price information displayed at computer terminals inside the Madrid Stock Exchange in Madrid. Photographer: Angel Navarrete/Bloomberg

Treasuries rose and the euro traded at an almost two-month low as the U.S. prepared to vote for president and concern grew Greece will fail to win a bailout. U.S. stocks closed higher after fluctuating during the day.

Treasury 10-year notes gained for a second day, with the yield dropping three basis points to 1.68 percent as of 4 p.m. in New York. The euro slid 0.4 percent to $1.2789, the lowest since Sept. 11. The Standard & Poor’s 500 Index increased 0.2 percent to 1,417.26 after losing 0.4 percent. Germany’s two-year yield reached minus 0.014 percent, negative for the first time since Sept. 6. Oil rebounded from a four-month low.

Trading volume for S&P 500 companies was 19 percent below the 30-day average before U.S. voters decide between giving President Barack Obama another four years in office or replacing him with Republican challenger Mitt Romney. U.S. service industries kept growing last month, a report showed. Greek Prime Minister Antonis Samaras will this week battle to win political support for measures needed to obtain aid.

“People are more like holding their breath and turning blue,” said Madelynn Matlock, who helps oversee about $14.7 billion at Huntington Asset Advisors in Cincinnati. She spoke in a phone interview. “There’s concern about Europe. The market is looking like there’s some worry in Greece. There’s also the election in the U.S. That keeps investors on the sidelines.”

U.S. Election

Two-year U.S. note yields decreased one basis point to 0.27 percent and rates on 30-year debt declined four points to 2.87 percent. Voters face unprecedented debt levels and a round of tax increases and spending cuts, which threaten to slow the economy.

Gauges of commodity, energy and technology companies rose at least 0.6 percent to lead gains among the 10 main industry groups in the S&P 500, while utilities, phone companies and financial firms retreated the most.

Apple Inc. (AAPL:US) rose 1.4 percent after selling 3 million units of its iPad mini and fourth-generation iPad during the debut weekend, saying demand for the smaller version of its tablet outstripped supply. KBW Inc. advanced 7.2 percent as Stifel Financial Corp. agreed to buy the boutique investment bank in a cash-and-stock transaction valued at $575 million. Time Warner Cable Inc. (TWC:US) declined 6.4 percent following earnings that disappointed investors as the company lost more video subscribers than analysts projected.

Service Industries

The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which covers about 90 percent of the economy, fell to 54.2 in October from the prior month’s 55.1. The median forecast of 76 economists surveyed by Bloomberg projected 54.5. Estimates ranged from 53 to 57. Readings above 50 signal expansion. The ISM services survey covers industries ranging from utilities and retailing to housing, health care and finance.

Swings in U.S. stocks have shrunk to the lowest level in six years, an indicator that has most often coincided with incumbent parties keeping the presidency in data going back to 1900. The Dow Jones Industrial Average has gained or lost 0.54 percent a day on average this year, the smallest fluctuations for an election year since George W. Bush defeated John Kerry in 2004, according to data compiled by Bloomberg.

Tight Race

Obama led Romney 48 percent to 45 percent in an Oct. 31- Nov. 3 national poll conducted by the Pew Research Center, a survey that was deadlocked at 47 percent each a week ago. Polls conducted by NBC News with the Wall Street Journal and ABC News with the Washington Post also showed movement for the president in recent days, albeit a 1 percentage point edge for Obama that is inside the margin of error for both surveys.

“President Obama winning a second term is viewed as equity negative, bond positive because it implies higher taxes and increased health-care spending,” Kit Juckes, head of foreign- exchange research at Societe Generale SA in London, said in a research note. “Romney winning cuts taxes and spending, and helps Wall St.”

Four shares fell for every one that gained in the Stoxx Europe 600 Index, which slipped 0.6 percent. HSBC Holdings Plc slid 1.3 percent as Europe’s largest bank by market value made an $800 million provision for penalties from a U.S. money- laundering investigation. Ryanair Holdings Plc (RYA) advanced 6 percent as the region’s biggest discount airline increased fiscal second-quarter profit 23 percent and raised its forecast for full-year earnings.

Bunds Rise

German 10-year bunds rose for a fourth day, pushing the yield down two basis points to 1.43 percent, as investors sought Europe’s safest government securities.

As Greece seeks a 31 billion-euro ($40 billion) financing tranche this month, Samaras is facing down a revolt in his three-party coalition. The leader of the Democratic Left yesterday reiterated his party’s opposition to changes in the labor law demanded by international creditors. While no date has been set for a vote on that bill, it may come as soon as Nov. 7. The budget vote is slated for Nov. 11.

Spain’s bonds fell, pushing the 10-year yield up nine basis points to 5.75 percent before the country sells debt maturing from 2015 to 2032 on Nov. 8.

Turkish two-year bond yields fell to a record 6.80 percent after Fitch Ratings raised the debt by one level to BBB-, the nation’s first investment-grade ranking since 1994, citing an easing in economic risk and lower government borrowing. The ISE National 100 Index rallied 1.8 percent to the highest level on record.

Currencies

The euro weakened against all 16 major peers, sliding 0.6 percent to 102.67 yen. Japan’s currency strengthened 0.2 percent to 80.27 per dollar.

The dollar strengthened against 10 of 16 major peers. The U.S. currency will gain if Romney pulls off a “big surprise” and wins the presidential election tomorrow, or if the outcome remains uncertain in an echo of 2000, according to Citigroup Inc.

A victory by Obama is more expected by the market so a Romney upset would have a bigger impact, Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York, wrote to clients today. A Romney presidency would see Treasury yields rise and the yen weaken because the yield premium investors receive for buying dollar-based assets versus those denominated in the Japanese currency would increase.

ECB Decision

Investors are also awaiting a Nov. 8 rate decision by the European Central Bank, as economists predict policy makers will keep the benchmark rate at a record low of 0.75 percent.

China’s purchasing managers’ index rose to 55.5 in October from 53.7 the previous month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on Nov. 3. A separate services index released today by HSBC and Markit Economics fell to 53.5 in October from 54.3 the previous month.

President Hu Jintao is set to hand over leadership of the Communist Party to Vice President Xi Jinping at a party congress that begins Nov. 8.

The S&P GSCI gauge of 24 commodities was up 0.7 percent. Oil rose 0.9 percent to $85.65 a barrel, after earlier reaching $84.34, the weakest since July 12.

Hedge funds cut bullish wagers on commodities by the most since June as prices retreated to a three-month low. Money managers reduced combined net-long positions across 18 U.S. futures and options in the week ended Oct. 30 by 11 percent to the lowest since July 10, Commodity Futures Trading Commission data show.

The MSCI Emerging Markets Index fell for the first time in five days, declining 0.4 percent. South Korea’s KOSPI and Hong Kong’s Hang Seng retreated. The Russian market is closed for a public holiday today.

To contact the reporters on this story: Rob Verdonck in London at rverdonck@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


Silicon Valley State of Mind
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • AAPL
    (Apple Inc)
    • $100.57 USD
    • 0.04
    • 0.04%
  • TWC
    (Time Warner Cable Inc)
    • $148.0 USD
    • 0.08
    • 0.05%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus