Treasuries Drop, Commodities Rise After Retail Sales Data

Treasuries fell and commodities rose after data on U.S. retail sales and Germany’s economy topped forecasts and France unexpectedly averted a contraction. Spanish bonds rallied, while U.S. stocks erased gains in the last hour of trading.

Ten-year Treasury yields climbed six basis points to 1.73 percent as of 4 p.m. in New York, while Spanish rates slid 11 basis points. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,403.97, erasing an advance that reached 0.4 percent. The euro was little changed at $1.2324. The yen slid against 15 of its 16 major peers as the Bank of Japan signaled it may take steps to revive growth. Cocoa and natural gas added more than 1.7 percent to lead commodities higher.

Retail sales jumped 0.8 percent in July, compared with a 0.3 percent increase estimated by economists in a Bloomberg survey. German gross domestic product expanded 0.3 percent in the second quarter from the first, compared with the 0.2 percent predicted in a Bloomberg survey. French GDP was unchanged in the quarter, better than the 0.1 percent decline forecast by economists.

“Today’s data points are indicative of an improving economic backdrop,” Ted Harper, who helps manage about $8 billion for Frost Investment Advisors LLC in Houston, said in a telephone interview. “The fact that we’ve gotten a little relief on some fronts is constructive and underpins the more favorable tone in the market of late.”

U.S. Stocks

The S&P 500 retreated for a second day after advancing for six straight days, its longest rally since 2010. Raw-material producers and technology shares led the decline today.

About 5.1 billion shares changed hands on all venues, an increase from yesterday, when U.S. equity volume reached the lowest level since at least 2008 excluding holidays. The Chicago Board Options Exchange Volatility Index, known as the VIX, increased 8.3 percent to 14.83, rebounding from a five-year low reached yesterday.

The Federal Reserve chairman will have a chance to talk more about monetary options when he speaks to economists and central bankers at the Kansas City Fed’s conference in Jackson Hole, Wyoming, Aug. 30 to Sept. 1. His speech at the 2010 conference set the stage for a second round of large-scale asset purchases, which the committee started in November that year.

Bernanke will also hold a press conference after the September FOMC meeting, when Fed officials publish updated forecasts for growth, unemployment, inflation and interest rates.

Estee Lauder

Estee Lauder Cos. gained 9.3 percent after quarterly profit beat analysts’ projections. Home Depot Inc. (HD) climbed 3.6 percent after reporting second-quarter earnings that topped estimates and raising its forecast for this year. Bank of America Corp. (BAC) rallied 0.8 percent, pacing gains in financial stocks.

Three shares advanced for each that retreated on the Stoxx 600. (SXXP) Aker Solutions ASA climbed 5.7 percent after the Norwegian oil-services company posted second-quarter profit and sales that beat analysts’ estimates. CRH Plc (CRH) plunged 4.8 percent as the building-materials company said like-for-like sales in Europe will drop in the second half of the year.

The euro strengthened against seven of 16 major peers. The euro-area economy contracted 0.2 percent in the second quarter, in line with the median forecast of 35 economists in a Bloomberg survey.

‘Not Collapsing’

“While not great in any way German and French GDP numbers were better than expected, which adds to the scenario that there is no risk of an imminent euro break up,” said Alexander Kraemer, a cross asset strategist at Commerzbank AG in Frankfurt. “It shows global growth is not collapsing, which also helps reduce investment risks.”

The yen fell 0.6 percent versus the dollar. Some Bank of Japan (8301) board members said policy makers shouldn’t dismiss any options in combating risks to the economy from the European sovereign debt crisis, a record of last month’s meeting showed.

The yield on benchmark 10-year German bunds climbed seven basis points to 1.47 percent and the rate on similar-maturity French debt added two basis point to 2.11 percent.

The yield on Italy’s two-year note fell five basis points, reversing an earlier advance. Spain’s two-year rate decreased six basis points to 4.21 percent.

‘Open Mind’

The Spanish government is considering a request for a sovereign bailout, European Economic and Monetary Affairs Commissioner Olli Rehn signaled in a Bloomberg Television interview. Spain has an “open mind,” Rehn said today in New York. No decision has been taken by Prime Minister Mariano Rajoy’s government, he said. “We stand ready to act if there is a request,” Rehn said.

Rajoy reiterated earlier he will act in the best interests of his country. Rajoy said today he won’t make a decision on whether to seek support from the ECB and a rescue fund until he has more details about how it works.

The U.K. is pressing for the ECB to share power with national regulators as it takes over euro-area bank supervision, according to policy planning documents obtained by Bloomberg News. The ECB should have a core set of central powers to oversee all banks in the 17-nation currency bloc while delegating some tasks to individual countries, under one option favored by the U.K. and European Union economic policy officials.

Greece sold 4.06 billion euros ($5.02 billion) of three- month bills, exceeding its 3.125 billion-euro target. Yields on Greece’s bonds due in February 2023 increased 15 basis points to 24.49 percent.

The Markit iTraxx Europe index of credit-default swaps linked to 125 companies with investment-grade rankings dropped two basis points to 145 basis points, the lowest since May 7.

Oil Gains

The S&P GSCI gauge of 24 commodities gained 0.3 percent. Crude oil increased 0.8 percent to $93.43 a barrel in New York, advancing for the first time in three days. Crude inventories probably declined 1.5 million barrels last week, according to the median response in a Bloomberg survey before an Energy Department report tomorrow.

The MSCI Emerging Markets Index added 0.4 percent, erasing most of yesterday’s retreat. Egypt’s EGX 30 Index increased 1.3 percent after the military council signaled it won’t oppose President Mohamed Mursi’s decision to retire the nation’s two top generals.

The Hang Seng China Enterprises Index of mainland companies advanced 1 percent and South Korea’s Kospi Index climbed 1.3 percent. India’s Sensex rose 0.5 percent after inflation eased more than estimated in July. Russia’s Micex Index gained 0.8 percent.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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