Treasuries climbed with gold while U.S. stocks erased losses as investors weighed developments in Ukraine while concern intensified that slowing growth in China will hurt demand. Oil retreated on rising U.S. supplies.
Yields on 10-year Treasuries fell four basis points to 2.73 percent by 5:12 p.m. in New York. The Standard & Poor’s 500 Index rose less than 0.1 percent after earlier falling. The MSCI All Country World Index dropped a fourth day in its longest slump this year. The yen strengthened versus most major peers while New Zealand’s dollar jumped after interest rates were raised from a record low. Gold touched the highest level since September and crude dropped to an almost five-week low.
China said last week it is targeting economic growth of 7.5 percent in 2014, unchanged from last year’s weakest goal since 1990. The country, which saw its first onshore bond default after a solar company failed to make an interest payment, reports on factory output tomorrow after data at the weekend showed an unexpected slide in exports. Russia’s standoff over Crimea intensified as it stood by Ukraine’s ousted president and called U.S. aid to the nation illegal.
“We saw a pretty healthy selloff based on China slowdown fears and potential Russian expansion,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said by phone. “The concerns of what’s going on are still on the minds of investors and they’re putting money into safe haven assets like U.S. Treasuries and gold. On the other hand, we’re seeing stocks aren’t completely out of the picture.”
The Treasury’s $21 billion auction of 10-year notes attracted the highest demand in a year as bonds advanced for a third day. DoubleLine Capital LP’s Jeffrey Gundlach said yields are poised to fall further and Pacific Investment Management Co.’s Bill Gross cut his holdings of U.S. government-related debt.
Gross, manager of the world’s biggest bond fund, reduced the allocation in his $236 billion Total Return Fund to 43 percent in February from 46 percent a month earlier as the Federal Reserve started reducing its bond-buying program, data on Pimco’s website showed yesterday. Gundlach, the founder of Los Angeles-based DoubleLine Capital, said in a webcast yesterday that 10-year yields will slide to 2.5 percent this year as the Fed tapers stimulus.
The Federal Open Market Committee, which meets March 18-19, cut monthly bond buying to $65 billion from $85 billion during its past two meetings. Policy makers have indicated they plan to taper by $10 billion at each meeting absent a weakening in the economy.
The S&P 500 rose for the first time in three days after closing at a record March 7. The index slipped 0.5 percent yesterday, the most in a week.
Six of the 10 main groups in the equities benchmark retreated today. Industrial, phone and financial stocks lost at least 0.1 percent to pace declines, while utilities surged 1.3 percent.
Homebuilders slumped after a Credit Suisse Group AG analyst downgraded PulteGroup Inc. and Toll Brothers Inc. Herbalife Ltd. lost 7.4 percent after saying the Federal Trade Commission has started a civil probe into its practices. Newmont Mining Corp. and Barrick Gold Corp. climbed more than 2.6 percent as gold futures jumped.
Investors have added $12.8 billion to U.S. equity exchange-traded funds in the past five days and withdrawn $2.4 billion from bond ETFs, data compiled by Bloomberg show. Real-estate stocks absorbed the most money among industry ETFs, taking in $156 million during the past week.
Ukraine’s interim Prime Minister Arseniy Yatsenyuk met with U.S. President Barack Obama and Secretary of State John Kerry in Washington today. The Russian Foreign Ministry said yesterday that U.S. aid to the acting government in Kiev would violate American law, because the departure of President Viktor Yanukovych last month constituted a coup.
Russia’s takeover of Crimea, home to its Black Sea Fleet, has sparked the worst crisis with western nations since the Cold War as the European Union and the U.S. try to use sanctions to force President Vladimir Putin to retreat.
“The overseas action and speculation out of China is putting pressure on international markets and you’re seeing it cause some de-risking in other markets like the U.S.,” Walter Todd, who oversees about $990 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said by phone. “Everybody’s kind of on edge when you’re at all-time highs.”
China weighed on the MSCI Emerging Markets Index, which fell 1.2 percent, the lowest level on a closing basis since Feb. 10. Equity benchmarks for developing nations including South Korea and the Philippines fell at least 1 percent.
Asian stock index futures were mixed, with Nikkei 225 Stock Average contracts slipping 1.2 percent in Chicago, while Korean Kospi Index futures climbed 0.3 percent. Futures on Hong Kong’s Hang Seng Index lost 0.5 percent while contracts on the Hang Seng China Enterprises Index declined 0.5 percent.
The Shanghai Composite Index closed at the lowest level since Jan. 20. The Hang Seng Index slid 1.7 percent and the Hang Seng China Enterprises Index recorded its lowest close since July in Hong Kong and has dropped 19 percent from a Dec. 2 peak, nearing what some traders consider a bear market.
China’s industrial output probably grew 9.5 percent in February, compared with a 9.7 percent gain the previous month, according to the median estimate in a Bloomberg survey before tomorrow’s data.
“The concern is that Chinese growth is still slowing,” said Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd. in Sydney, which oversees $131 billion. “The risk is this little correction could linger a little bit longer.”
Russia’s Micex Index dropped 2.6 percent to the lowest close since May 2012, while yields on government bonds due February 2027 surged to the highest level since the securities were issued in February 2012.
The S&P GSCI (SPGSCI) gauge of 24 commodities fell 0.7 percent to the lowest close since Feb. 14 in New York.
West Texas intermediate oil declined 2 percent to $97.99 a barrel. WTI earlier fell to the lowest intraday level since Feb. 7 after an Energy Information Administration report showed U.S. oil inventories rose three times as much as expected and refineries operated at the lowest rate in four months.
Soybeans for May delivery dropped 2.1 percent and reached $13.655, the lowest since Feb. 24. Prices surged 14 percent through March 7, when they touched $14.60, since the start of February.
Gold futures rose 1.8 percent to settle at $1,370.50 an ounce. The metal has climbed for three straight days in New York, advancing to the highest level since Sept. 19 as tension in Ukraine spurred demand for haven investments. Bullion is up 14 percent this year.
Wheat futures for May delivery rose 3.8 percent to close at $6.8375 a bushel, leaving prices up 24 percent from a January closing low of $5.515. A 20 percent gain based on the settlement price marks the common definition of a bull market.
The yen advanced for a third day against the dollar, gaining 0.3 percent to 102.77. The Swiss franc climbed to the strongest level versus the dollar since 2011 and the euro approached the highest price since 2011.
New Zealand’s dollar gained as much as 0.6 percent after the nation became the first major developed market to raise key rates from a record low. Reserve Bank of New Zealand Governor Graeme Wheeler said he expects to boost rates by two percentage points over two years, with the pace depending on economic data.
The Stoxx Europe 600 Index dropped 1.1 percent.
Industrial production in the 18-nation euro zone unexpectedly declined in January as energy output dropped, the European Union’s statistics office in Luxembourg said today. Factory output slipped 0.2 percent from December. The median forecast in Bloomberg News survey of 39 economists was for a 0.5 percent increase.
Ireland’s 10-year yields dropped one basis point, or 0.01 percentage point, to 3.05 percent after falling to a record 3.01 percent. The average yield to maturity on bonds from Greece, Ireland, Italy, Portugal and Spain fell to 2.438 percent on March 10, the lowest in the history of the euro area, according to Bank of America Merrill Lynch indexes.
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