Dollar Weakens as Stocks Climb; Treasuries Little Changed

Photographer: Tomohiro Ohsumi/Bloomberg

A sales assistant arranges T-shirts at Fast Retailing Co.'s g.u. store in the Shibuya district of Tokyo. Core inflation in Japan climbed 3.4 percent last month, the most since 1982 and matching the median economist forecast amid a sales-tax increase and higher utility charges. Close

A sales assistant arranges T-shirts at Fast Retailing Co.'s g.u. store in the Shibuya... Read More

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Photographer: Tomohiro Ohsumi/Bloomberg

A sales assistant arranges T-shirts at Fast Retailing Co.'s g.u. store in the Shibuya district of Tokyo. Core inflation in Japan climbed 3.4 percent last month, the most since 1982 and matching the median economist forecast amid a sales-tax increase and higher utility charges.

The dollar slid to a seven-week low as the yen strengthened and falling Treasury yields boosted demand for emerging-market currencies. U.S. stocks rose, paring a weekly loss for the Standard & Poor’s 500 Index.

The Bloomberg Spot Dollar Index dropped 0.3 percent to 1,004.94 at 4 p.m. in New York, the lowest since May 9. The Standard & Poor’s 500 Index rose 0.2 percent, paring its loss for the week to 0.1 percent. The 10-year Treasury yield rose less than 1 basis point to 2.53 percent. The yen appreciated 0.3 percent against the dollar and South Korea’s won gained 0.2 percent. The Stoxx Europe 600 Index was little changed, capping its largest weekly loss in two months.

Treasuries rallied this week, giving the 10-year yield its biggest decline since May after data showed the U.S. economy shrank more than analysts predicted and consumer spending rose less than estimated. Russell Investments concludes the annual revisions to its equity benchmark gauges today, while investors prepare for the quarter’s end. Core inflation in Japan climbed 3.4 percent last month, the most since 1982, reducing the need for further central bank stimulus.

“It’s trundle-along speed in terms of the U.S. and while that continues, the Fed is going to be in no rush to start preparing the market for higher rates,” said Paul Robson, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “If it’s not doing that, the dollar tends to underperform somewhat.”

The U.S. currency touched its weakest level since 2011 against the New Zealand dollar today and the lowest since August 2008 versus South Korea’s won.

The S&P 500 lost 0.1 percent this week, paring its gain in June to 1.9 percent. Stocks retreated yesterday as James Bullard, president of the Federal Reserve Bank of St. Louis, suggested that higher interest rates may occur in the first quarter of next year.

‘Timely Warning’

Bullard’s comments are “a timely warning that the time for the Fed to start raising interest rates is drawing nearer,” Stephen Halmarick, head of investment markets research at Colonial First State Global Asset Management, which oversees about $160 billion, said by phone from Sydney. “I don’t think that risk is factored into the market sufficiently.”

Stocks erased losses in the final 30 minutes of trading today amid Russell Investments’ annual revisions to its equity benchmark gauges. Russell’s U.S. stock indexes, including the Russell 1000 Index and the Russell 2000 Index (RTY), are used as benchmarks for $5.2 trillion in assets, according to the company’s website. In the previous two years, the reconstitution day ranked in the top two busiest trading sessions, data compiled by Bloomberg show.

With the end of the quarter, investors should expect about $20 billion in selling of equities and some buying of bonds as pension fund managers rebalance their portfolios, Boris Rjavinski, a strategist at UBS AG, estimated in a June 23 report.

Window Dressing

“At quarter-end people are worried about window dressing,” James Liu, global market strategist at JP Morgan Funds said in a phone call. Liu helps oversee $500 billion of assets. “We did have a very good quarter relative to the first, so maybe that means on the margin people are going to be a little more cautious, especially because of the bad economic data that has come out this week.”

The benchmark index has advanced 4.7 percent this quarter, its sixth straight gain for the longest winning streak since 1998. The gauge reached a record on June 20 as reports showed the economy is recovering from extreme weather. Investors shrugged off data this week showing U.S. gross domestic product shrank 2.9 percent in the first quarter, the worst reading since 2009.

Consumer Confidence

Fed Chair Janet Yellen last week said accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth.

The Thomson Reuters/University of Michigan’s final June index of consumer sentiment rose to 82.5 from 81.9 a month earlier, according to a report released today. The median projection in a Bloomberg survey of 57 economists called for 82 after a preliminary June reading of 81.2.

Treasuries are delivering the biggest weekly gains in more than a month amid an uneven U.S. economic expansion, suggesting the Fed won’t accelerate the pace of projected interest-rate increases.

Ten-year notes headed for a second quarterly gain after the Fed cut its long-term forecasts for economic growth and its target interest rate earlier this month. The yield on the 10-year note dropped seven basis points this week, the most since the week ending May 16.

The S&P 500 trades at 16.6 times the projected earnings of its members, close to its highest valuation in four years.

U.S. stocks are poised for the third-slowest month in six years. About 5.6 billion shares have changed hands each day in June, trailing every month since 2008 except for the previous two Augusts, data compiled by Bloomberg show. The S&P 500 has failed to post a gain or loss exceeding 1 percent for 49 straight days, the longest stretch since 1995.

DuPont Co. fell 3.4 percent today after the maker of Pioneer genetically-modified corn trimmed its full-year earnings forecast as farmers switched to soybeans. Nike Inc. added 1.3 percent after the largest sporting-goods maker posted fourth-quarter profit that beat analysts’ estimates.

The Stoxx 600 retreated 1.8 percent for the week, the biggest decline since April 11.

Mediaset SpA gained 4 percent today after Exane BNP Paribas upgraded the Italian broadcaster controlled by former Prime Minister Silvio Berlusconi to neutral from a rating similar to sell. Ophir Energy Plc fell 5.4 percent. UBS AG cut the oil explorer to neutral from buy, citing the company’s failure to find reserves in an offshore Gabon field.

Imagination Technologies Group Plc tumbled 5.8 percent. Intel Corp. sold 25 million shares, or a 9.3 percent stake, at 205 pence apiece for a value of 51.25 million pounds ($87.3 million).

Emerging Markets

Emerging-market stocks were little changed as a rally in Indian drugmakers offset declines in Asian technology shares. The MSCI Emerging Markets Index fell less than 0.1 percent, as it headed toward a 1.9 percent advance for June, its fifth straight monthly gain.

Gold posted its fourth weekly gain, the longest streak in five months as the dollar’s drop boosted demand for the metal as an alternative investment. Futures increased 0.2 percent today.

Oil capped the biggest weekly drop since March as the conflict in Iraq has so far spared the country’s main oil-producing region. West Texas Intermediate crude fell 10 cents to $105.74 today, extending the loss for the week to 1.4 percent.

Cocoa rose 2.7 percent to $3,135 a ton in New York, touching the highest level since 2011.

To contact the reporters on this story: Oliver Renick in New York at orenick2@bloomberg.net; Rachel Evans in New York at revans43@bloomberg.net

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

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