Treasuries Fall, U.S. Futures Gain on Obama Jobs Plan; Dollar Fluctuates
Treasuries declined and Standard & Poor’s 500 Index futures climbed after President Barack Obama detailed his $447 billion plan to boost hiring in the U.S. Stocks in Europe and Asia fell for the first time in three days.
Ten-year yields increased two basis points to 2 percent as of 8:46 a.m. in London. S&P 500 futures gained 0.3 percent, after earlier decreasing as much as 0.6 percent. The Stoxx Europe 600 Index slipped 0.2 percent, while the MSCI Asia Pacific Index sank 0.6 percent. Nickel and copper paced a retreat among metals. The Dollar Index was up less than 0.1 percent, following an earlier drop of as much as 0.3 percent.
Obama called on Congress to pass his package after jobs growth stalled last month, fueling concern the U.S. recovery is faltering. Federal Reserve Chairman Ben S. Bernanke yesterday stopped short of detailing new plans to boost growth, while European Central Bank President Jean-Claude Trichet said “downside risks” for the region’s economies have risen. Ministers from the Group of Seven nations will meet in Marseille, France, amid mounting bets on a Greek default.
“The headline number was better than expected but it comes down to how he’s going to fund it and how soon the plan will be implemented,” Khiem Do, head of multi-asset strategy at Baring Asset Management, said in a Bloomberg Television interview from Hong Kong. “We need some action right now as far as the U.S. economy is concerned.”
Obama’s Job Plan
Longer-maturity bonds led losses after Obama detailed his jobs package, which includes infrastructure spending, subsidies to local governments to stem teacher layoffs and cutting in half the payroll taxes paid by workers and small-business owners. Tax cuts account for more than half the dollar value of the stimulus. The Treasury Department will sell $66 billion in three-, 10- and 30-year debt next week.
“Overall, it’s a net positive for equity markets,” said Brian Jacobsen, the chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. Still, the proposal will be “will be subject to amendments. As there’s so much uncertainty as to what the final product will be, it’s difficult to game this from an investment perspective,” he said in a Bloomberg Television interview.
Futures signal the S&P 500 may rebound from a 1.1 percent retreat yesterday. Bernanke said risks to the economic outlook have increased and policy makers will discuss tools they could use to boost growth at their meeting this month. As in a speech on Aug. 26, the Fed chief stopped short of signaling what he thinks is the central bank’s best option to aid the economy.
The U.S. Department of Homeland Security said it has “specific, credible but unconfirmed threat information” as the 10th anniversary of the Sept. 11 terrorist attacks nears.
Europe, Asia Stocks
More than three stocks slid for every one that gained on the Stoxx 600. Porsche SE plunged 8.8 percent after Volkswagen AG said it will no longer complete its merger with the carmaker by the end of the year because of pending lawsuits. Infineon Technologies AG and STMicroelectronics NV slipped after Texas Instruments Inc. (TXN) cut its sales forecast.
About four shares declined for every three that advanced on MSCI’s Asia Pacific Index, which is headed for a 2.2 percent weekly loss. Japan’s Nikkei 225 Stock Average lost 0.6 percent after data today showed the nation’s economy contracted more than the government initially estimated in the second quarter. Australia’s S&P/ASX 200 Index rose 0.2 percent and South Korea’s Kospi Index dropped 1.8 percent.
China’s Shanghai Composite Index fell 0.1 percent after Caixin magazine reported the northeastern province of Liaoning defaulted on about 85 percent of its debts servicing payments in 2010. The index earlier jumped as much as 1.2 percent after data today showed inflation eased to 6.2 percent in August from the three-year high of 6.5 percent in July.
The dollar declined weakened 0.4 percent to $1.0617 versus Australia’s currency and slid 0.4 percent to 87.35 U.S. cents against its New Zealand counterpart. It traded little changed at $1.3877 per euro. The Dollar Index has gained 1.9 percent this week, the largest weekly increase since the period ended May 6.
Gold for immediate delivery rose 0.3 percent to $1,875.63 an ounce. Bullion declined 0.4 percent this week, after reaching an all-time high of $1,921.15 on Sept. 6. Three-month copper retreated 0.7 percent to $9,047.50 a metric ton on the London Metal Exchange, while nickel lost 1.8 percent to $21,675 a ton.
Oil climbed as much as 0.5 percent to $89.50 on the New York Mercantile Exchange before trading at $89.03. The contract for October delivery earlier fell as much as 0.8 percent. Futures have gained 3.1 percent this week and 20 percent the past year.
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