The yen slid to 100 per dollar for the first time in four years, extending losses triggered by the Bank of Japan’s deflation-fighting efforts. U.S. 30-year bonds erased gains while U.S. benchmark stock indexes fell from records.
The yen sank 1.6 percent to 100.62 per dollar as of 4 p.m. in New York as it weakened against all 16 major peers. Thirty-year Treasury rates rose one basis point to 3.00 percent after sliding four basis points earlier. The Standard & Poor’s 500 Index lost 0.4 percent to 1,626.67 after setting records for five straight days. Copper fell 0.9 percent, while agricultural commodities rallied.
Japan’s currency has dropped 4.2 percent since April 4 when BOJ Governor Haruhiko Kuroda outstripped economist forecasts by pledging to double monthly bond purchases and scoop up longer-term debt to reach a 2 percent annual inflation goal. The currency last traded at 100 on April 14, 2009. Today’s weakness in the yen also came after U.S. jobless claims unexpectedly declined to a five-year low and a Federal Reserve official discussed the possibility of scaling back stimulus.
“We’ve seen these brightening prospects for the U.S. job market, a burst of news last week with the payrolls number, and again today with the weekly jobless claims tally,” Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said in a phone interview from Washington. “Signs of an improving U.S. job market has finally chipped away and made a difference against the yen.”
The Japanese currency fell as much as 1.7 percent versus the dollar, the biggest drop since April 2009. The currencies of Taiwan, South Africa and New Zealand also rallied more than 1 percent versus the yen.
Thirty-year Treasuries rallied earlier after a $16 billion auction of the debt drew a yield of 2.980 percent, compared with a forecast of 2.997 percent in a Bloomberg News survey of nine of the Federal Reserve’s primary dealers. Thirty- and 10-year yields are trading near the highest levels in a month.
“Higher yields drew demand, as well as the fact that there’s no supply for two weeks,” said Dan Mulholland, head of U.S. Treasury trading in the capital-markets unit of BNY Mellon Corp. in New York. “It was better than expected. It prompted some short-coverings.” Short positions are bets than an asset will decline in value.
The S&P 500 slipped in morning trading before recovering losses in the early afternoon and then returning lower.
Six straight months of gains have sent the S&P 500 to 15.9 times reported operating earnings, the highest valuation in almost three years. Stocks have rallied this year, adding almost $5 trillion to the value of global equities as central banks from the U.S. to Europe and Japan buy bonds and cut borrowing costs to revive economic growth.
Federal Reserve Bank of Philadelphia President Charles Plosser said unemployment will probably fall to 7 percent at the end of 2013 and he would favor reducing the Fed’s $85 billion monthly pace of bond purchases next month.
“I would like to see us begin to scale this thing back beginning even as early as the next meeting” of the Federal Open Market Committee, Plosser said to reporters after a speech today in New York. The committee is scheduled to meet June 18-19. Plosser doesn’t vote on policy this year.
Plosser’s remarks highlight a debate within the FOMC on whether to expand or curb a pace of bond purchases that has pumped up the central bank’s balance sheet to $3.32 trillion. At their April 30-May 1 meeting, policy makers said they’re prepared to increase bond buying in response to changes in the labor market or inflation.
The S&P 500 reached a record for a fifth day yesterday and has jumped 14 percent this year to extend its rebound from a bear-market low in 2009 to 140 percent. Among shares moving today, Monster Beverage Corp. sank 5.4 percent after saying sales growth slowed in April. News Corp. advanced 4.5 percent after saying net income tripled and topped analysts’ estimates. Apache Corp. jumped 4.8 percent after saying it will divest $4 billion in assets and buy back shares.
Applications for unemployment insurance payments decreased by 4,000 to 323,000 in the week ended May 4, the least since January 2008, Labor Department figures showed today. Economists forecast 335,000 claims, according to the median estimate in a Bloomberg survey. The four-week average declined to 336,750, the lowest since November 2007, the month before the start of the worst economic slump since the Great Depression.
The Stoxx Europe 600 Index closed up less than 0.1 percent at the highest level since June 2008. Snam SpA, the owner of Italy’s biggest natural-gas network, sank 5.1 percent as Eni SpA, the nation’s largest oil company, sold an 11.7 percent stake for about 1.5 billion euros ($2 billion). Experian Plc (EXPN) rallied 6.4 percent as the biggest credit-checking company reported earnings that topped analysts’ estimates and raised its dividend.
“We’ve had 11 straight months of gains” for stocks in Europe, Henry Dixon, a fund manager at Matterley Ltd. in London, said by phone. “This is very unchartered territory. It is understandable people are nervous.”
The MSCI Emerging Markets Index erased early gains and fell 0.2 percent, snapping a four-day rally. Emerging market technology shares surged to a 13-year high as Samsung Electronics Co. rallied 1.8 percent as South Korea cut interest rates.
South Korea’s Kospi index jumped 1.2 percent after the central bank lowered the benchmark seven-day repurchase rate to 2.5 percent from 2.75 percent. Six of 20 economists surveyed by Bloomberg predicted the move, while the remainder forecast no change. The Korean won lost 0.9 percent versus the dollar.
The Shanghai Composite Index (SHCOMP) lost 0.6 percent after producer prices declined more than forecast.
Copper futures fell the most in a week, losing 2.6 percent to $3.3405 a pound in New York, on signs that demand may ease in China, the world’s biggest consumer of industrial metals. China’s producer prices slid 2.6 percent in April from a year earlier, government data showed. Copper has lost 8.5 percent this year.
West Texas Intermediate oil dropped 23 cents to $96.39 a barrel. UN carbon permits rose 18 percent to their highest in three weeks, trading at 40 euro cents on the ICE Futures Europe exchange in London.
Corn rallied 2.5 percent and wheat jumped 2.5 percent on speculation that overnight rain in the Midwest and more forecast for next week will curb planting progress and increase risks for lower U.S. yields. Soybeans added 1.3 percent.
Spain’s five-year yield rose six basis points to 2.90 percent. Investors submitted bids for 1.62 times the amount of the 13-year securities sold today, down from 2.85 times at the previous auction in January. The so-called bid-to-cover ratio The so-called bid-to-cover ratio also dropped for three- and five-year notes as the government sold a combined 4.57 billion euros ($6 billion) of securities.
‘Taking a Breather’
“The market is taking a breather, reflecting the fact that yields have fallen so much in recent weeks,” said Pablo Zaragoza, a strategist at Banco Bilbao Vizcaya Argentaria SA in Madrid.
Italy’s 10-year rate increased five basis points to 3.88 percent, while German bund yields was little changed at 1.27 percent.
The cost of insuring European corporate bonds climbed for a second day, rising from a three-year low. The Markit iTraxx Europe Index of 125 investment-grade companies added two basis points to 92.5 basis points, the highest level since May 2.
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