Stocks Fall as Treasuries, Gold Drop While Pound Weakens

Photographer: Jin Lee/Bloomberg

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A trader works on the floor of the New York Stock Exchange.

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Photographer: Jin Lee/Bloomberg

A trader works on the floor of the New York Stock Exchange.

U.S. and European stocks fell for a fifth day, gold slid and Treasury yields reached the highest level since September as improving economic data fueled bets the Federal Reserve will reduce stimulus. The euro rose as the central bank gave no sign it will start negative deposit rates.

The Standard & Poor’s 500 Index (SPX) slipped 0.4 percent to 1,785.03 by 4:30 p.m. in New York, extending its longest slump since September, while the benchmark gauge of U.S. options rose an eighth day to match a record rally. The Stoxx Europe 600 Index dropped to a seven-week low while the euro gained versus 13 of 16 major currencies. Ten-year Treasury yields rose three basis points to 2.87 percent and German bund rates added five basis points. Gold and silver fell more than 1.5 percent.

U.S. gross domestic product climbed at a 3.6 percent annualized rate in the third quarter, up from an initial estimate of 2.8 percent and the strongest growth since the first quarter of 2012, data today showed. Another report showed jobless claims unexpectedly decreased last week as investors gauge the outlook for Fed bond purchases before tomorrow’s monthly payrolls figures. The European Central Bank and Bank of England both kept key interest rates at record lows.

“There’s angst in the short run, but I think it’s only positive in the long run that the Fed begin to taper and extricate itself from being the ultimate market maker,” Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said by phone. His firm oversees $363.8 billion. “The numbers today pave the way for the Fed to do that.”

Market Movers

Among U.S. stocks moving today, financial, consumer-staples and telephone companies led declines among all 10 main industries in the S&P 500.

Microsoft Corp. (MSFT) fell 2.4 percent after comments from a Ford Motor Co. director indicated Chief Executive Officer Alan Mulally wouldn’t take over Microsoft’s top job. Safeway Inc. slid 4.6 percent after Jana Partners LLC cut its stake in the supermarket chain. Apple Inc. rose 0.5 percent as China Mobile Ltd. moved closer to offering its 759 million subscribers iPhones.

The S&P 500 has surged 25 percent this year, poised for the biggest annual gain in a decade. The index has lost more than 1 percent since reaching its last record Nov. 27 amid concern that an improving economy will spur the Fed to reduce bond purchases aimed at suppressing interest rates and bolstering growth. The central bank has said it will start slowing the pace of stimulus should the economy improve in line with its forecasts.

VIX Streak

The Chicago Board Options Exchange Volatility Index (VIX) climbed 2.6 percent to 15.08 today, its highest closing level since Oct. 15. The gauge of S&P 500 options known as the VIX matched its longest stretch of gains since April 2012.

Jobless claims in the U.S. decreased 23,000 to 298,000 in the week ended Nov. 30, the Labor Department said today. The median forecast of 41 economists surveyed by Bloomberg called for an increase to 320,000. Another government report showed factory orders declined 0.9 percent in October, compared with the 1 percent drop forecast by economists.

Employers added 185,000 workers to nonfarm payrolls last month after they increased by 204,000 in October, data tomorrow will show, according to the median estimate in a Bloomberg survey of 85 economists, while the unemployment rate is forecast to fall to 7.2 percent to match the lowest level since 2008.

European Rates

ECB President Mario Draghi said the euro area may face prolonged inflation after policy makers kept their benchmark rate at an all-time low of 0.25 percent today, in line with estimates. The Bank of England left its key rate unchanged at 0.5 percent, also in line with projections. The Federal Open Market Committee meets Dec. 17-18.

The British pound weakened against 15 of 16 major peers, losing percent 0.9 percent versus the yen and the Swiss franc. The Bank of England held rates even as Chancellor of the Exchequer George Osborne raised the nation’s growth forecast in his Autumn Statement for the first time since 2010.

The yield on 10-year U.K. gilts increased 1.5 basis points, or 0.015 percentage point, to 2.92 percent, the highest level since September.

Spain’s five-year note yield added five basis points to 2.82 percent after declining earlier in the session. The government sold five-year debt at the lowest yield since July 2005. Moody’s Investors Service raised the nation’s credit-rating outlook yesterday.

Merck, FLSmidth

Merck KGaA, a Germany-based drug and chemical company, gained 4.9 percent after agreeing to buy AZ Electronic Materials SA for 1.6 billion pounds ($2.6 billion) to enable its chemicals business to expand into new markets. AZ rallied 50 percent, the biggest gain since its initial public offering in October 2010.

Vienna Insurance Group AG (VIG) slid 5.2 percent as terms showed that an undisclosed investor has put an 83 million-euro ($113 million) stake in the company on sale. FLSmidth & Co. A/S slipped 1.9 percent after the Danish mining-equipment maker lowered its forecast earnings margin for this year.

The MSCI Emerging Markets Index added 0.3 percent, snapping a three-day drop. Benchmark gauges in Brazil, Colombia and South Africa gained at least 0.7 percent, while the Shanghai Composite Index (SHCOMP) lost 0.2 percent, falling from the highest level since Sept. 12.

India Elections

India’s S&P BSE Sensex Index jumped 1.2 percent and the rupee climbed to a five-week high. The Bharatiya Janata Party, which picked Narendra Modi as its choice for prime minister, was set to retain two states, take power from the ruling Congress in another and win the most seats in Delhi, according to an exit poll yesterday.

Modi, the chief minister of Gujarat state since 2001, has overseen annual economic growth of 10 percent on average and attracted investment to companies from Ford Motor Co. to the Tata Group.

Ukrainian stocks erased earlier gains to drop for an eighth straight day. Government officials have started lobbying for foreign economic support after the largest protests in Kiev in almost a decade.

Gold futures declined 1.9 percent to $1,223.80 an ounce and silver slipped 1.6 percent to $19.3705 an ounce to lead the S&P GSCI Index (SENSEX) of commodities lower for the first time this week.

Oil rose a fifth straight day, the longest rally since August. Crude for January delivery gained 0.2 percent to $97.38 a barrel, the highest settlement price since Oct. 29.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Nick Taborek in New York at ntaborek@bloomberg.net

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

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