Stocks Fall on Inflation Concern; Treasuries, Wheat, Corn Gain
Stocks fell, sending emerging markets down for a fifth day, amid concern accelerating inflation will push up borrowing costs. Corn, wheat and soybeans rose to the highest prices since 2008, while the dollar slid and Treasuries rebounded.
The MSCI Emerging Markets Index lost 1.5 percent at 4 p.m. in New York to extend its longest slump since November. The Standard & Poor’s 500 Index decreased 0.3 percent in a retreat from its highest close in 2 1/2 years, while European shares extended losses as Ireland said it will postpone planned capital injections into banks. Wheat jumped as much as 2.2 percent, and corn added 4 percent. The Dollar Index lost 0.5 percent and 10- year Treasury yields fell from the highest level since May.
Inflation expectations are increasing around the world after China’s central bank raised interest rates by 0.25 percentage point yesterday and U.K. food prices rose at the fastest pace in 19 months in January. Federal Reserve Chairman Ben S. Bernanke gave no indication he plans to scale back a $600 billion plan to boost the economy after two regional Fed bank presidents said rising prices are a threat.
“Global inflation seems to be the major theme,” said Barry Knapp, head of equity strategy for Barclays Plc in New York. “The risk is increasing in a lot of the emerging markets,” he said. “In the U.S., even as some forward yield curves have started to price in a tighter policy going forward, the risk of inflation is overblown. Fixed income volatility has increased.”
Yield Curve
The difference between yields on 2-year and 10-year Treasury notes slipped to 285 basis points after earlier climbing to 291 basis points, the highest in a year. The so- called yield curve is considered a gauge of investors’ expectations for future inflation and economic growth. The 10- year note yield lost 9 basis points to 3.66 percent today, extending declines as an auction of $24 billion of the securities drew the highest level of bidders since at least 2003 in a class of investors that includes central banks.
The MSCI Emerging Markets Index has declined 3.6 percent this year, compared with a 4.9 percent rally in the MSCI gauge for developed countries, as central banks from China to India and Brazil raised borrowing costs. The Shanghai Composite Index retreated 0.9 percent today as trading resumed following a week- long holiday for the Lunar New Year. Benchmark stock gauges in India, South Korea, Thailand, Indonesia and Hungary slid more than 1 percent.
The S&P 500 retreated from the highest level since June 2008 and its most expensive price-to-earnings valuation in seven months at almost 16 times reported operating earnings, according to data compiled by Bloomberg.
Earnings Season
Walt Disney Co. rallied 5.3 percent after sales topped estimates and lead the Dow Jones Industrial Average higher for an eighth straight day, its longest rally since March. The 30- stock Dow climbed 6.74 points, or 0.1 percent, to 12,239.89, its highest close since June 16, 2008.
Chevron Corp. lost 1.5 percent to help send energy companies to the biggest drop among 10 groups in the S&P 500. Wells Fargo & Co., the biggest U.S. home lender, lost 2.8 percent after Chief Financial Officer Howard I. Atkins retired.
About 74 percent of the 319 companies in the S&P 500 that have reported quarterly results since Jan. 10 have topped analysts’ per-share profit predictions, according to data compiled by Bloomberg.
NYSE Euronext rallied 14 percent after the operator of the New York Stock Exchange said it was in advanced talks to merge with Deutsche Boerse AG. Shares of Nasdaq OMX Group Inc., CBOE Holdings Inc. and IntercontinentalExchange Inc. rallied at least 4.2 percent.
European Markets
Three shares fell for every two that rose in Europe’s Stoxx 600, which slipped 0.4 percent. Reckitt Benckiser Group Plc sank 5.1 percent as the maker of Neurofen painkillers said 2011 sales will probably rise at a slower pace than last year. London Stock Exchange Group Plc jumped 3.1 percent after agreeing to buy Toronto Stock Exchange owner TMX Group Inc. in an all-share transaction valued at about C$3.2 billion ($3.2 billion). TMX rallied 6.4 percent in Toronto.
Irish bank stocks fell after the government said it will postpone capital injections into Allied Irish Banks Plc, Bank of Ireland Plc and EBS Building Society until after the country’s election on Feb. 25. The Irish Overall Index slumped 1.8 percent as financial shares slumped 5 percent collectively.
U.K. food inflation accelerated to the fastest pace in 19 months in January, as prices rose an annual 4.6 percent, up from 4 percent the previous month and the most since June 2009, the British Retail Consortium said today. The Confederation of British Industry raised its forecast for consumer-price growth.
Wheat, Corn Rally
Wheat for March delivery climbed to as high as $8.9325 a bushel, and corn increased to as much as $7 a bushel on the Chicago Board of Trade. Crude oil slipped 0.2 percent to $86.77 a barrel. Copper dropped 1.4 percent.
The U.S. dollar weakened against nine of 16 major currencies, losing 0.8 percent to $1.3731 per euro. The Dollar Index, a gauge of the currency against six major peers, slipped for a third straight day.
New Zealand’s currency depreciated 0.4 percent versus the dollar and 1.1 percent against the euro after Finance Minister Bill English said the economy might have contracted in the fourth quarter, entering its second recession in two years.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net.
To contact the editor responsible for this story: Justigan Carrigan at jcarrigan@bloomberg.net.
Emerging Stocks, U.K. Gilts Fall on Inflation
Qilai Shen/Bloomberg
A man walks past a board showing stock prices at a securities exchange in Shanghai.
A man walks past a board showing stock prices at a securities exchange in Shanghai. Photographer: Qilai Shen/Bloomberg
Feb. 9 (Bloomberg) -- Steven Kroll, managing director at Monness Crespi Hardt & Co., and Michael Palmer, a trader at Group One Trading, talk about the outlook for the U.S. stock market. They speak with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Feb. 9 (Bloomberg) -- Art Barnaby, an agricultural economist at Kansas State University, and David Dawe, a senior economist at the Food and Agriculture Organization of the United Nations, discuss the rice, corn and wheat markets and global food prices. They talk with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
China Swaps, Yuan Gain as Metals Fall on Rates
Nelson Ching/Bloomberg
China’s interest-rate swaps rose the most in two months, the yuan climbed and metals fell as the nation’s central bank raised interest rates for the third time in four months.
China’s interest-rate swaps rose the most in two months, the yuan climbed and metals fell as the nation’s central bank raised interest rates for the third time in four months. Photographer: Nelson Ching/Bloomberg
Most Stocks Fall on Inflation Concern; Wheat Advances
Andrey Rudakov/Bloomberg
Wheat rose to the highest price since August 2008.
Wheat rose to the highest price since August 2008. Photographer: Andrey Rudakov/Bloomberg
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