Commodities Begin Bull Market Amid U.S. Drought
Commodities entered a bull market as grains rallied amid the worst U.S. drought in half a century, while the euro climbed on optimism leaders will make progress taming the debt crisis. The Standard & Poor’s 500 Index failed to remain above a four-year high.
The S&P GSCI gauge of 24 raw materials rose 0.9 percent to 675.55 and has jumped 21 percent from this year’s lowest close on June 21. The euro strengthened 1 percent to a six-week high of $1.2488. Ireland’s nine-year bond yield dropped below 6 percent. Germany’s two-year yield rose above zero for the first time in more than five weeks. The S&P 500 slipped 0.4 percent to 1,413.17 after climbing as high as 1,426.68.
The drought that has parched fields in the U.S. Midwest sent soybeans to an all-time high on the Chicago Board of Trade today and the U.S. Department of Agriculture has cut its corn harvest forecast by 27 percent since June. As Luxembourg Prime Minister Jean-Claude Juncker, head of euro-area finance ministers, prepares to visits Greece tomorrow, optimism about Europe’s efforts to fight its crisis wasn’t enough to push the S&P 500 to a new high.
“We’ve come a long way and we’re approaching some long- term resistance points” in the stock market, said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management. His firm oversees $170 billion. “That’s causing people to pause a little bit. We’re going to need some real news to break through these levels and we’re not getting any right now.”
Corn, wheat and Brent crude have led the GSCI commodities gauge rally from the closing low on June 21, surpassing the 20 percent threshold that signals a bull market. Silver, soybeans and cotton climbed more than 2 percent to lead gains among 19 of the index’s 24 commodities today. Crude oil added 0.5 percent to $96.40 a barrel in New York.
In Europe, stocks and the euro increased as German Chancellor Angela Merkel and French President Francois Hollande prepare to meet in Berlin on Aug. 23, before holding separate talks with Greek Prime Minister Antonis Samaras later in the week. International creditors may adjust the interest on Greek bailout loans, Norbert Barthle, a senior lawmaker of Merkel’s party, was quoted as saying by the Passauer Neue Presse.
The S&P 500 has rebounded 11 percent from a five-month low in June as gauges of energy, technology and financial companies climbed more than 12 percent to lead the advance. The index remains about 10 percent below its record high of 1,565.15 reached in October 2007.
Urban Outfitters Inc. rallied 18 percent today after posting second-quarter profit that topped analysts’ estimates as sales gained at all of its main brands. Nordson Corp., which makes equipment used to apply adhesives and sealants in manufacturing, gained 11 percent after forecasting fourth- quarter profit that exceeded projections.
Benchmark indexes pared gains as Apple Inc. (AAPL) retreated from a record, slipping 1.4 percent to $656.06.
Traders also awaited policy clues from the Federal Reserve. Minutes of the central bank’s last meeting will be released tomorrow, and the Fed will hold a summit at the end of the month in Jackson Hole, Wyoming.
Fed Bank of Atlanta President Dennis Lockhart said U.S. policy makers face a risk of easing too much while trying to spur a “disappointing” three-year-old economic recovery.
“There is a risk to monetary policy being employed too aggressively and without effect to address economic problems that can be resolved only by fiscal reforms that involve making tough choices about the allocation of public resources,” Lockhart said today in a speech in Atlanta. While “monetary policy can exert a powerful positive influence on an economy,” it “is not a panacea.”
The Stoxx Europe 600 Index (SXXP) climbed 0.4 percent as more than three shares advanced for every one that declined. Julius Baer Group Ltd. added 3.1 percent as the wealth manager founded in 1890 reduced its rights offer to 500 million Swiss francs ($516 million) from 750 million francs. Straumann Holding AG (STMN) tumbled 13 percent, the most since 2008, after the world’s biggest maker of dental implants reported first-half profit that fell.
The euro appreciated against 15 of its 16 major peers, advancing 0.8 percent versus the yen. Concessions are possible for Greece so long as Samaras shows a willingness to meet the main targets set out in his country’s bailout program, a senior lawmaker with Chancellor Merkel’s party said.
A precedent for program adjustments was made with the first Greek bailout, when the country secured lower interest rates and longer maturities on bilateral loans than those originally set, Norbert Barthle, the Christian Democratic Union’s budget spokesman in parliament, said today in a telephone interview.
“I’m expecting to hear European leaders expressing their willingness in coming to a consensus in terms of what steps are necessary to make this thing work,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. “Any kind of concession toward allowing Greece more time, more lenient terms in the interest rates or financing, would be welcome.”
German 10-year bonds fell a second day, pushing the yield five basis points higher to 1.56 percent. The rate on similar- maturity U.S. Treasuries was little changed at 1.80 percent.
Spain’s two-year note yield fell for a sixth day, dropping 10 basis points as the government sold 4.51 billion euros ($5.6 billion) of bills, meeting its maximum target. Portuguese 10- year bonds advanced, pushing the yield down 35 basis points to 9.25 percent, the lowest since May 2011.
Emerging-market stocks advanced after China injected record funds into its banking system.
The MSCI Emerging Markets Index rose 0.6 percent, the most since Aug. 9. The Shanghai Composite Index gained 0.5 percent. The People’s Bank of China conducted 220 billion yuan ($34.6 billion) of reverse-repurchase operations, the most in a single day, according to a trader at a primary dealer required to bid at the auctions. Benchmark gauges in Russia, India and Taiwan gained at least 1 percent.
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