The euro fell against the dollar for the first time in five days and the region’s bonds rallied as European Central Bank President Mario Draghi said policy makers have an open mind about a negative deposit rate. U.S. stocks rose as American jobless claims decreased to a five-year low.
The euro lost 0.8 percent to $1.3073 at 10:43 a.m. in New York while two-year German note yields fell below zero and rates on 10-year French and Belgium debt slid to records. The Standard & Poor’s 500 Index climbed 0.6 percent after yesterday’s 0.9 percent drop. Copper jumped 1.8 percent and aluminum added 0.7 percent as 19 of 24 commodities in the S&P GSCI Index rose, while natural gas plunged 4.6 percent after bigger-than-forecast growth in inventories. Ten-year U.S. Treasury yields rose less than one basis point to 1.63 percent.
European policy makers cut the main refinancing rate to a record low 0.5 percent from 0.75 percent and reduced the marginal lending rate to 1 percent from 1.5 percent. The euro turned lower as Draghi, speaking in Bratislava, signaled that officials may take the unprecedented step of charging banks to park excess cash with the ECB overnight.
“Most importantly he seemed more open to a cut in the deposit rate and it is this that drove the euro lower after trading choppily initially,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co. in New York, wrote in a note to clients.
The euro weakened against 15 of 16 major peers, losing more than 0.8 percent versus the currencies of South Africa, Mexico and Canada.
‘Ready to Act’
The euro fell on the prospect of a negative deposit rate, which would amount to the ECB venturing into territory few others have dared. With the 17-nation economy mired in recession and weakness spreading to the largest economies in the region, Draghi is ramping up the ECB’s response.
“We will look at all the incoming data and stand ready to act if needed,” Draghi said at a press conference in the Slovakian capital. Asked if further action could include taking the deposit rate into negative territory from zero, he said: “We will look at this with an open mind.”
Sweden’s krona dropped versus all but one of its major peers after data showed the nation’s manufacturing unexpectedly contracted in April.
The S&P 500 rebounded from the biggest drop in two weeks. Facebook Inc. (FB:US) advanced 3.2 percent as the operator of the world’s largest social network reported first-quarter sales that topped projections. General Motors Co. rose 4.7 percent as it narrowed its first-quarter loss in Europe. MetLife Inc. and Prudential Financial Inc. climbed more than 3 percent and 7 percent respectively after the insurers’ earnings beat forecasts.
Applications for U.S. unemployment insurance payments fell 18,000 to 324,000 in the week ended April 27, the fewest since January 2008, Labor Department figures showed. Economists forecast 345,000 claims, according to the median estimate in a Bloomberg survey. A Labor Department official said there was nothing unusual in the data.
A report tomorrow is projected to show U.S. unemployment stayed at 7.6 percent in April, while payrolls rose 145,000, compared with an increase of 88,000 the prior month, according to the median estimates of economists in a Bloomberg survey.
The Stoxx Europe 600 Index was little changed as most of the region’s markets reopened following a holiday. The regional benchmark erased an earlier decline as investors weighed the ECB’s actions and companies from Sanofi to Statoil ASA reported profit that fell short of analysts’ estimates.
Sanofi slipped 1.1 percent as France’s largest drugmaker said the expiry of several patents has led to increased competition for some of its medicines. Statoil retreated the most in almost a year after reporting lower oil and gas production in Norway. Bayerische Motoren Werke AG climbed after saying that demand increased for its 3 Series cars.
Italy’s two-year note yield fell to as low as a record 1.05 percent, and Spain’s tumbled 10 basis points to 1.63 percent, the least since August 2010. France’s 10-year bond yield fell to a record 1.67 percent.
Copper climbed 1.8 percent to $6,918 a metric ton and aluminum rose 0.7 percent to $1,837 a ton. The LME Index of six industrial metals fell 3.2 percent yesterday, the most since December 2011, as nickel and tin joined copper in a bear market.
Most emerging market stocks fell as weaker growth in Chinese manufacturing and South Korean exports fueled concern that the global economy is slowing. The MSCI Emerging Markets Index was little changed, as energy stocks retreated 0.9 percent as a group. Technology shares gained the most in the index, rising 0.6 percent. The Shanghai Composite Index fell 0.2 percent as it traded for the first time this week.
Indian stocks advanced 1.2 percent, gaining for a third day to the highest level since Feb. 4 on a closing basis. The Reserve Bank of India may lower its key rate by 25 basis points at a meeting tomorrow, according to the median estimate of 40 economists in a Bloomberg survey.
The Philippines peso strengthened 0.4 percent versus the dollar to a three-week high as S&P raised the country’s credit rating one step to BBB-, the lowest investment grade. S&P cited moderating inflation and declining reliance on foreign-currency debt as reasons for the upgrade, with a positive outlook.
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