U.S. stocks fell a third day amid concern an improving economy will cause the Federal Reserve to reduce monetary stimulus, while 10-year Treasuries advanced as the central bank bought debt. The pound climbed to near a two-year high against the dollar and crude oil surged.
The Standard & Poor’s 500 Index (SPX) lost 0.3 percent to 1,795.15 and the Stoxx Europe 600 Index slid 1.5 percent, the most since August. Ten-year Treasury yields fell one basis point to 2.78 percent by 4:45 p.m. in New York. The pound strengthened to as much as $1.6437. Portugal’s five-year note yield fell from a four-week high after a bond exchange. Oil rallied after TransCanada Corp. said it will begin operating a pipeline to deliver crude to Texas from Oklahoma in January.
Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said the unprecedented cash added to the financial system by central banks globally is raising the risk of a slide in asset prices. U.S. reports on payrolls, services and new home sales are due this week. Data yesterday showed American manufacturing grew at the fastest pace in more than two years last month, bolstering prospects the Fed may start tapering stimulus sooner than expected.
“There’s trepidation building with the employment numbers coming on Friday,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion, said by phone. “There’s nervousness that maybe the Fed takes a more hawkish tone at its December meeting if the jobs numbers are stronger than consensus estimates.”
Economists surveyed by Bloomberg predict that U.S. employers added 181,000 jobs to nonfarm payrolls last month and the unemployment rate fell to 7.2 percent, matching a five-year low. The Fed meets Dec. 17-18 to discuss policy after minutes of their last meeting in October showed officials may reduce their $85 billion in monthly bond buying should the economy improve as anticipated.
The Fed bought $937 million of Treasuries due from November 2024 to May 2030 in its first acquisition today. In its second, the central bank purchased $3.73 billion in U.S. government debt maturing between September 2019 and October 2020. Since the Fed began buying Treasuries in its third round of quantitative easing in January, it only completed two separate purchases on the same day on Nov. 18. After today, it will carry out dual purchases Dec. 9 and Dec. 19, according to the Fed Bank of New York’s website.
Global stocks beat all assets for a third month in November, the longest winning streak since 2009. Commodities extended declines as gold fell the most since June. Gold fluctuated today, with futures rising 0.1 percent after losing more than 2 percent yesterday.
The MSCI All-Country World Index of equities in 45 markets rose 1.5 percent including dividends last month and the S&P 500 reached a record as China pledged to expand economic freedoms, and the European Central Bank cut interest rates. The U.S. Dollar Index advanced 0.6 percent and the S&P GSCI Total Return Index of 24 commodities fell 0.8 percent. Bonds of all types lost 0.16 percent on average, according to Bank of America Merrill Lynch’s Global Broad Market Index.
“Investors are all playing the same dangerous game that depends on a near perpetual policy of cheap financing and artificially low interest rates in a desperate gamble to promote growth,” Pimco’s Gross wrote in his monthly investment outlook posted on Newport Beach, California-based Pimco’s website today. The Fed, Bank of Japan,ECB and Bank of England “are setting the example for global markets, basically telling investors that they have no alternative than to invest in riskier assets or to lever high-quality assets.”
The S&P 500 slid 0.3 percent yesterday, paring its rally this year to 26 percent, on pace for its biggest annual gain since 2003. The gauge reached an all-time high Nov. 27.
Among stocks moving today, Krispy Kreme Doughnuts Inc. plunged 20 percent after quarterly revenue missed analysts’ estimates. Yum! Brands Inc., the owner of KFC and Pizza Hut, fell 2.7 percent after releasing a financial update that showed volatile Chinese sales. Apple Inc. rose 2.7 percent after buying data-analytics firm Topsy Labs Inc.
Shares in the world’s biggest mining companies fell to the lowest level in almost four months as signs the U.S economy is strengthening increased speculation that the Fed will reduce its monetary stimulus, contributing to gold’s slump yesterday.
The 108-member Bloomberg World Mining Index dropped 0.8 percent to the lowest level since Aug. 7 today. Antofagasta Plc (ANTO), the copper company controlled by Chile’s billionaire Luksic family, fell 3.4 percent in London trading, while Newcrest Mining Ltd. fell 6.7 percent in Australia.
The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 option prices known as the VIX, rose as much as 3.6 percent to 14.74, the highest intraday level since Oct. 17. The measure has gained for six straight sessions, its longest rally since May 2012.
Asian index futures dropped, with contracts on Japan’s Nikkei 225 Stock Average slipping to 15,490 by 3 a.m. in Osaka and trading at 15,550 in Chicago, after the gauge closed at 15,749.66 yesterday. Futures on indexes in Australia, Hong Kong and South Korea lost at least 0.5 percent in their most recent trading sessions.
Almost 16 shares fell for every one that gained in the Stoxx 600 Index, with trading volumes 17 percent more than the 30-day average, according to data compiled by Bloomberg. The Stoxx 600 reached its highest level since May 2008 Nov. 28 and has advanced 14 percent this year.
ThyssenKrupp AG declined 2.2 percent after the steelmaker raised 882.3 million euros ($1.2 billion) through a share sale. Sonova Holding AG slipped 1.8 percent as Morgan Stanley cut its rating on the Swiss hearing-aid maker.
Smith & Nephew Plc and Next Plc climbed at least 1.9 percent after brokerages upgraded the shares.
Portugal’s 10-year bond yield decreased eight basis points, or 0.08 percentage point, to 5.86 percent and the five-year rate slid 14 basis points to 4.83 percent after touching 4.98 percent yesterday, the highest level since Nov. 6. The nation swapped 6.6 billion euros ($9 billion) of short-maturity debt for longer-dated securities, easing the nation’s 2014 funding needs. The yield on 10-year German bunds dropped two basis points to 1.73 percent.
The MSCI Emerging Markets Index fell for a second day, slipping 1.1 percent. The gauge has lost more than 4 percent since May 22 when the Fed signaled its asset-buying program could be trimmed should the U.S. economy show sustained improvement.
South Korea’s Kospi Index (KOSPI) slid 1.1 percent today, the most in more than a week, as Hyundai Motor Co. and Kia Motors Corp. sank more than 4 percent after car sales dropped. The Jakarta Composite Index snapped a two-day rally, retreating 0.8 percent, and the rupiah weakened 1 percent. Benchmark stock indexes in Russia, Turkey, Brazil and South Africa lost at least 1.6 percent.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong retreated from a nine-month high, decreasing 0.9 percent, as China’s services gauge fell. The Shanghai Composite Index gained 0.7 percent to the highest since October as a drop in money-market rates eased concern of a cash squeeze.
Brazil’s Ibovespa index slid 1.8 percent, extending yesterday’s 2.4 percent slump, after a report showed the economy slowed in the third quarter. Hungary’s forint gained 0.4 percent versus the euro as the country posted a trade surplus in September.
The pound was up 0.2 percent to $1.6390 after construction activity rose for a seventh month and the Bank of England said it would assess measures to prevent the build-up of financial-stability risks.
The yen strengthened 0.4 percent to 102.49 per dollar, snapping a four-day retreat, and the euro advanced 0.4 percent to $1.3589. The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, fell 0.3 percent.
West Texas Intermediate crude climbed 2.4 percent to $96.04 a barrel, the highest level in more than a month, after jumping 1.2 percent yesterday. The segment of the Keystone pipeline expansion project will move 700,000 barrels a day of crude to Port Arthur, Texas, from Cushing, Oklahoma, the delivery point for WTI futures, the filing showed. Port Arthur is home to 6 percent of U.S. refining capacity.
A report due tomorrow is forecast to show oil stockpiles dropped last week in the U.S., the world’s largest oil consumer, for the first time since September.
Organization of Petroleum Exporting Countries ministers meeting tomorrow will probably maintain their 30 million barrel-a-day target as demand for the group’s oil may remain near current levels in 2014, said three delegates who spoke on condition of anonymity because the discussions are private.
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