Global Stocks End Longest Rally in 11 Months
The MSCI Asia Pacific Index lost 0.4 percent to 118.68 as of 11:48 a.m. in Tokyo, following an eight-day rally that boosted the value of global equities by $3 trillion. Photographer: Kimimasa Mayama/Bloomberg
June 23 (Bloomberg) -- David Kelly, chief market strategist for JPMorgan Funds, talks with Bloomberg's Rishaad Salamat about his strategy for U.S. stocks and fixed-income investments. U.S. stocks sank yesterday, with benchmark gauges declining the most in almost three weeks, as home sales unexpectedly dropped and the Standard & Poor’s 500 Index slipped for a second day below chart levels monitored by analysts. Kelly, speaking from Cleveland, Ohio, also discusses Federal Reserve policy, the outlook for the U.S. economy, and China's shift in currency policy. (Source: Bloomberg)
June 22 (Bloomberg) -- Clyde Prestowitz, president of the Washington-based Economic Strategy Institute and a former Commerce Department international trade official, talks with Bloomberg's Rishaad Salamat about China's shift in currency policy and its implications for the U.S. economy. President Barack Obama called China’s decision to increase the flexibility of the exchange rate of the yuan "a constructive step that can help safeguard the recovery and contribute to a more balanced global economy." (Source: Bloomberg)
Stocks slid, with the MSCI World Index halting the longest rally in 11 months, as a drop in U.S. home sales underscored concern the recent advance in equities may have overshot prospects for the economy. Treasuries jumped as a sale of two-year notes produced a record low yield.
The MSCI gauge of 24 developed nations lost 1.4 percent at 4 p.m. in New York, ending a 10-day streak of gains. The Standard & Poor’s 500 Index declined 1.6 percent, with energy shares leading the drop as the White House said it would appeal a judge’s ruling to lift a deepwater drilling moratorium. The MSCI Emerging Markets Index slid 1.1 percent, halting its longest rally since 2005. Oil fell for the first time in three days. Ten-year Treasury yields retreated to 3.16 percent.
U.S. benchmark indexes fell the most in almost three weeks amid concern the housing market may struggle to recover in the absence of government incentives. Losses accelerated as the S&P 500 retreated below levels monitored by investors who base trading decisions on chart patterns. The pullback in stocks came before leaders of the Group of 20 industrialized nations meet June 26 to consider ways to reduce deficits.
“The market is constantly trying to figure out if the world is going back down into a double dip or if the economic expansion can be sustained,” said Rod Smyth, chief investment strategist at Riverfront Investment Group in Richmond, which manages $2 billion. Today’s housing numbers “are fodder for the bears.”
Energy Shares Tumble
Energy shares in the S&P 500 sank 2.7 percent as a group after the Obama administration said it will appeal a New Orleans federal judge’s ruling to lift the White House’s six-month moratorium on deepwater drilling. Alcoa Inc., Caterpillar Inc. and Home Depot Inc. had the biggest declines in the Dow Jones Industrial Average, losing at least 2.6 percent, as the 30-stock gauge tumbled 148.89 points to 10,293.52.
Purchases of existing houses decreased 2.2 percent to a 5.66 million annual rate, the National Association of Realtors said. To receive a government incentive worth as much as $8,000, buyers must have signed contracts by the end of April and need to complete deals by the end of this month.
“The recovery in housing remains very fragile,” said Alan Gayle, senior investment strategist at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. “The market will reflect lack of conviction particularly if the economy starts to lose momentum. We’re treading water.”
200-Day Average
The S&P 500 slid below its average level over the past 200 days today, after climbing above it on June 15 for the first time in almost a month. The level, currently at about 1,111, is watched by investors and analysts who make trading decisions based on chart patterns. The S&P 500 has climbed 4.3 percent from a seven-month low on June 7 as concern over Europe’s debt crisis eased.
In the U.K., Chancellor of the Exchequer George Osborne today lowered the country’s economic forecast and announced spending cuts and some tax increases to narrow the budget gap.
Germany, France and the U.K. jointly called for levies on banks’ balance sheets in an attempt to overcome opposition to the proposal by other members of the Group of 20 nations before this week’s summit.
The Stoxx Europe 600 Index of equities in 18 western European countries fell 0.5 percent, snapping a nine-day rally, the longest winning streak in 11 months. Commodity producers led the retreat, with BHP Billiton Ltd., the world’s biggest mining company, falling 2.1 percent in London. BNP Paribas SA led declines in banks, falling 1.9 percent in Paris after Fitch Ratings cut its credit rating on France’s biggest lender. ‘
Canon, Mitsui
The MSCI Asia Pacific Index slipped 0.8 percent, its first drop in nine days. Newcrest Mining Ltd., Australia’s biggest gold producer, declined 1.8 percent in Sydney. Canon Inc., a Japanese camera maker that counts Europe as its biggest market, dropped 2.7 percent in Tokyo.
The yuan, which rallied 0.4 percent against the dollar yesterday, fell 0.2 percent today on speculation China’s central bank will intervene to limit gains after dropping a two-year peg to the dollar.
“With the gains we had in markets in recent days, and given that the ongoing economic problems are still very much around us, there’s room for profit taking at these levels,” said Francisco Salvador, co-strategist at Iberian Equities in Madrid. “The yuan revaluation has not come with the strength that many expected, nor it will have the wide effect many hoped for.”
Emerging Markets
The MSCI Emerging Markets Index retreated for the first time in 11 days, dropping 1.1 percent. The Dubai Financial Market General Index lost 1.4 percent after index provider MSCI Inc. kept the United Arab Emirates as a frontier market, disappointing some investors who anticipated an upgrade to emerging market status.
The yen and dollar strengthened against 13 of 16 major counterparts, while the Swiss franc rose to a record against the euro. The euro weakened to $1.2271.
Crude oil for July delivery fell 61 cents, or 0.8 percent, to settle at $77.21 a barrel on the New York Mercantile Exchange. Oil has risen 15 percent in the past year. July crude expired at the close of floor trading. The more active August contract lost 76 cents, or 1 percent, to $77.85 a barrel.
Copper rose for a second day in New York on speculation that a stronger yuan will boost demand from China, the world’s largest metals consumer. Copper futures for September delivery climbed 1.7 percent to $3.0105 a pound in New York.
Gold futures for delivery in August rose 10 cents to $1,240.80 on the Comex in New York. Gold for immediate delivery gained $3.15, or 0.3 percent, to $1,236.85.
Treasuries rose after the sale of $40 billion in two-year notes drew a record low yield of 0.738 percent. The average yield forecast was 0.751 percent in a Bloomberg News survey of 8 of the Federal Reserve’s 18 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.45, compared with an average of 3.10 for the previous 10 sales. The amount of the sale was $2 billion less than the prior sale, the second straight reduction.
To contact the reporter on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net
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