Stocks Fall, Yen Gains as House Delays Vote; Spanish Bonds Drop
Stocks fell for a third day and the yen rose toward a record against the dollar as U.S. lawmakers called off a vote on House Speaker John Boehner’s plan for raising the debt limit. Spanish and Italian bonds and the euro fell as Moody’s Investors Service said it may downgrade Spain.
The MSCI All-Country World Index declined 0.6 percent at 4:05 p.m. in Tokyo. Standard & Poor’s 500 Index futures sank 0.5 percent. The yen climbed as much as 0.3 percent to 77.46 per dollar, while the euro dropped 0.3 percent against the Swiss franc. The yield on Spanish 10-year bonds rose nine basis points, while the rate on Italian 10-year notes gained 10 basis points. Oil fell 0.4 percent in New York, set for a weekly loss.
House Republican leaders scrapped a vote on the debt ceiling bill Thursday night in Washington, indicating that Boehner is short of votes needed to pass his bill amid a vow by Senate Democrats to defeat the measure. The delay fueled concern that a compromise by the two parties won’t be reached before the Aug. 2 deadline for a possible U.S. default. Figures today are forecast to show the economy grew at a slower pace last quarter.
“Its unbelievable, these guys are not just playing with financial markets but their own constituents’ jobs,” said Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., which oversees about $100 billion. “It’s certainly adding to stock-market nervousness. I think they will eventually get a deal that avoids massive spending cuts or default, but the risk is growing that they won’t.”
The Stoxx Europe 600 Index decreased 0.8 percent, with Eni SpA (ENI), Italy’s biggest oil company, sliding 1.5 percent after reporting earnings that missed analyst estimates. The MSCI Asia Pacific Index sank 0.9 percent, extending its weekly loss to 1.9 percent, as Nintendo Co. and Sony Corp. (6758) cut their profit forecasts. The Asian gauge is still headed for a 1.1 percent monthly gain, its first since April.
Nintendo, the world’s largest maker of video-game machines, fell as much as 21 percent, the most in at least 21 years in Osaka. Sony, Japan’s biggest exporter of consumer electronics, dropped 3.3 percent. TDK Corp. (6762) plunged 5.6 percent as the world’s biggest maker of magnetic heads for disk drives reported an 83 percent profit drop. Taiwan Semiconductor Manufacturing Co. retreated 1.4 percent after the world’s largest customized chipmaker said profit fell 11 percent last quarter.
Futures signal the S&P 500 may extend a four-day slump. The gauge has declined 1.5 percent in July, its third consecutive monthly drop and the longest losing streak since November 2008.
Representative Kevin McCarthy of California, the House’s chief vote-counter, told reporters after several hours of closed-door meetings that there would be no House vote tonight. Senate Democrats are working to break the impasse over raising the debt limit by devising a strict enforcement mechanism to guarantee future deficit savings, according to Democratic officials.
Impact to Growth
The Obama administration was scheduled brief the public no earlier than after U.S. financial markets close today on priorities for paying the nation’s bills if the $14.3 trillion debt ceiling isn’t raised, a Democratic Party official said.
“There’s a fair bit of uncertainty in the short term,” said Sean Fenton, who helps manage about $1.1 billion at Tribeca Investment Partners in Sydney. “The market has been reasonably calm, but we’re getting close to the deadline and they’re starting to worry more about the impact to U.S. growth if we don’t get a resolution soon.”
U.S. gross domestic product likely grew 1.8 percent in the second quarter, compared with 1.9 percent in the prior three months, according to the median forecast of economists surveyed by Bloomberg News. Ten-year Treasuries yields were little changed at 2.93 percent before the release of today’s report.
The dollar has slipped 0.3 percent in the past week, extending its losses in the past month to 1.5 percent, according to Bloomberg Correlation-Weighted Currency Indexes. The U.S. currency traded at 80.14 Swiss centimes, little changed from yesterday, when it fell to a record low of 79.90.
The euro weakened to 1.14419 against the franc and sank 0.5 percent to 110.77 yen after Moody’s said Spain’s regions are struggling to cut budget deficit and last week’s Greek bailout increases the risk that bondholders will have to pay for further European rescues. A cut would probably be “limited to one notch,” Moody’s said.
The New Zealand dollar, known as the kiwi, sank 0.6 percent to 86.64 U.S. cents. Data today showed the nation’s home- building approvals fell in June for the second time in three months. South Korea’s won weakened 0.2 percent to 1,054.08 after Statistics Korea said industrial production expanded 6.4 percent in June from a year earlier, the slowest pace in nine months.
Hong Kong’s first inflation-linked bonds jumped to HK$106.65 on their debut, having been sold at HK$100. The city’s consumer prices rose 5.6 percent from a year earlier in June, the most since July 2008, and the Hong Kong dollar’s peg to the greenback means local interest rates track those in the U.S., where the Federal Reserve has kept a near-zero policy rate since December 2008.
The S&P GSCI Index of commodities fell 0.3 percent, a third day of losses. Oil for September delivery declined 0.4 percent to $97.03 a barrel on the New York Mercantile Exchange. Prices are 2.8 percent lower this week and 1.7 percent higher the past month.
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