Treasuries rose while the cost to insure Irish government bonds jumped to a record amid concern that Europe’s debt crisis is worsening and American consumer confidence is slumping. U.S. stocks fluctuated; the euro fell.
Ten-year Treasury yields fell 1 basis point to 2.75 percent at 1:58 p.m. in New York and slid as much as 7 basis points. Costs to protect Irish debt from default and the yield premium investors demand to own the nation’s 10-year bonds instead of benchmark German debt both reached records. The Standard & Poor’s 500 Index drifted between gains and losses near 1,125. The euro weakened from a five-week high against the yen.
Speculation Ireland and Portugal will need outside assistance to fund deficits fueled concern that Europe’s sovereign-debt crisis still has the potential to derail the global economic recovery. U.S. stocks erased an early rally fueled by better-than-estimated results at Research In Motion Ltd. and Oracle Corp. as a consumer confidence gauge slid to a one-year low.
“The signals are still mixed,” said John Carey, Boston- based money-manager at Pioneer Investment Management, which oversees about $230 billion. “People and companies perhaps are not as confident as they should be. There are remaining issues in Europe. We’re not in a double dip recession, but the recovery is fragile.”
Treasuries Extend Gains
Treasuries extended gains after the Thomson Reuters/ University of Michigan preliminary index of consumer sentiment dropped to 66.6 from 68.9 in August. Economists forecast the measure would rise to 70, according to the median estimate in a Bloomberg News survey.
The yield on the 10-year Irish bond surged 26 basis points to 6.29 percent in London. The spread with German bunds widened to as much as 389 basis points, or 3.89 percentage points, the most on record, according to Bloomberg generic data.
Technology companies led the early rally in U.S. equities. Oracle jumped 7.4 percent after its first-quarter earnings and sales forecast exceeded analysts’ estimates. Research In Motion advanced 1.7 percent after reporting second-quarter revenue and profit that beat analysts’ estimates. Oracle also beat predictions as sales of database software and Sun Microsystems Inc. server computers helped it capitalize on a recovery in information-technology spending.
U.S. stock swings will likely be stronger today as the expiration of futures and options on stocks and equity indexes adds to market volatility. The process known as quadruple witching occurs every three months.
“It’s encouraging to see technology companies showing positive results,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $55 billion. “They have a fair amount of cash and healthy balance sheets,” he said. “The European debt situation is a protracted problem. It’s going to take years to move past. Unfortunately, the market moves in minutes. It ends up being a frustrating match.”
Ireland isn’t facing difficulty raising funds, Finance Minister Brian Lenihan said today, seeking to quell speculation that the country may require financial aid from outside sources. Barclays Plc said in a note to investors yesterday that Ireland may need to accept external assistance if there are additional losses among financial companies or the economy worsens.
The International Monetary Fund said Ireland has taken “assertive measures to deal with the banking crisis” and it doesn’t envision the country will need financing, IMF spokeswoman Conny Lotze said today in an e-mailed statement.
Portugal may have to seek IMF aid to address the problems of external financing, Diario de Noticias reported on its Web site, citing three former finance ministers Eduardo Catroga, Medina Carreira and Miguel Beleza.
The euro weakened against 14 of 16 of its most-traded peers, falling 0.2 percent to 111.97 yen after appreciating to as strong as 112.98 yen. The common European currency slipped 0.2 percent to $1.3049 after climbing to $1.3159, the highest level since Aug. 11.
China’s yuan was set for its biggest weekly advance in 28 months on speculation a faster pace of appreciation will be tolerated after U.S. Treasury Secretary Timothy F. Geithner called for “significant” gains. The central bank set the reference rate at 6.7172 per dollar today, the strongest level since July 2005.
SouFun Holdings Ltd., the operator of China’s biggest real- estate website, jumped as much as 74 percent in New York after raising $125 million in this month’s first U.S. initial public offering. The company that controls almost half of China’s online real-estate advertising market was valued about 14.3 times earnings, or 14 percent less than the average of six Internet portals and property information providers, data compiled by Independent International Investment Research Plc and Bloomberg show.
European shares wiped out gains, with the benchmark Stoxx Europe 600 Index falling 0.2 percent, erasing an earlier 1.1 percent rally. Allied Irish Banks Plc tumbled 11 percent and Bank of Ireland Plc fell 7.1 percent. Allied Irish shares will be removed from the Stoxx 600 today, according to Societe Generale SA index forecasting.
Crucell NV soared 56 percent after Johnson & Johnson said it planned to offer 1.75 billion euros ($2.3 billion) to take full control of the vaccine maker. A total of $1.43 trillion of deals has been announced around the world so far this year, up from $1.25 trillion for the same period last year, according to data compiled by Bloomberg.
Corporate creditworthiness in Europe is the best ever compared with governments, credit-default swap prices show, as companies cut debt while governments struggle with budget deficits.
The difference between the Markit iTraxx Europe Index of corporate credit-default swaps and the Markit iTraxx SovX Western Europe Index of contracts tied to government debt widened 1 basis point to a record 49, according to data from CMA and JPMorgan Chase & Co.
Gold futures climbed as much as 0.8 percent to a record $1,284.40 an ounce. Copper rose to the highest price in almost five months as inventories contracted for the 30th straight week. October crude oil slipped 1.9 percent to $73.13 a barrel in New York.
Corn for Delivery in December jumped 3.8 percent to $5.1475 a bushel on the Chicago Board of Trade, rising above $5 for the first time in almost two years, on concern that falling U.S. yields and higher demand from importers will erode supplies in the world’s largest exporter. Goldman Sachs Group Inc. also raised its three-month forecast for the grain. Tyson Foods Inc. and Smithfield Foods Inc. tumbled more than 5 percent on speculation feed costs will increase.