The dollar gained versus most major peers before data forecast to show U.S. retail sales rose for a fourth month, while the yen slid after Japan’s economy expanded less than estimated. Gold and silver rallied while the Standard & Poor’s 500 Index retreated and European shares fluctuated.
The Bloomberg Dollar Index, a gauge of the currency against 10 peers, climbed 0.4 percent at 4 p.m. in New York for its first advance in seven days. The yen declined 0.6 percent to 96.81 per dollar. Gold climbed 1.7 percent and silver jumped almost 5 percent. The S&P 500 lost 0.1 percent while the Stoxx Europe 600 Index ended little changed, with trading volumes at least 29 percent less than the 100-day average for each. Ten-year Treasury yields rose four basis points to 2.61 percent.
U.S. retail sales probably rose 0.3 percent in July from the prior month, according to a survey of economists before a Commerce Department report tomorrow, as investors scrutinize American economic data for hints to the Federal Reserve’s plans for stimulus. Gross domestic product in Japan grew at an annualized 2.6 percent last quarter, a government report showed, less than the 3.6 percent median projection in a Bloomberg survey of economists.
“Forward expectations are certainly helping the dollar to push sharp gains,” Ravi Bharadwaj, a senior market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co., said in a phone interview. “Market participants are hyper-sensitive to data right now, so you’d expect a strong dollar reaction if there’s a deviation from what investors have predicted. There’s also been a bit of profit-taking.”
The U.S. currency strengthened against all 16 major peers, gaining at least 0.6 percent versus the yen, Australian dollar and Brazilian real. The yen declined against 15 of its 16 major counterparts, with the currencies of the U.S., Taiwan and South Korea appreciating the most.
“There is some disappointment that the Japanese growth rate was below expectations,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. ‘There’s a chance the BOJ could move to more aggressive easing in the first half of next year.’’
The S&P 500 posted its biggest weekly decline since June last week, dropping 1.1 percent amid concern the Fed will reduce the pace of its its $85 billion in monthly bond purchases as the economy improves.
Tesla Motors Inc. fell 3.7 percent after Lazard downgraded the carmaker’s shares. Hecla Mining Co. gained 5.8 percent, helping lead precious-metal producers higher as gold and silver increased for a fourth day. BlackBerry Ltd. rallied 11 percent in Toronto after the smartphone maker’s board said it is exploring alternatives, including a possible sale.
Last week’s drop in U.S. stocks came after the S&P 500’s valuations jumped to their highest levels in more than three years. The benchmark index has rallied 18 percent this year and trades at 15.3 projected earnings, up from a multiple of 13.1 at the beginning of this year, data compiled by Bloomberg show.
Earnings grew 3.6 percent for the 450 companies in the S&P 500 that posted results so far in the reporting season, according to data compiled by Bloomberg.
Speculation that the Fed will taper its bond purchases in September as the economy strengthens has whipsawed the market. The S&P 500 sank as much as 5.8 percent over the five weeks ended June 24, before recovering all the losses to reach an all-time high on Aug. 2.
“We’ve seen a rally with a multiple expansion and not necessarily earnings growth,” Jeff Schwarte, a money manager who helps oversee about $290 billion in Des Moines, Iowa, at Principal Global Investors, said by phone. “We need to see earnings, we need to see some resolution on tapering. People are a little nervous about tapering, but if the economy is self sustaining, it’s totally the right decision to taper. Everybody is trying to balance what tapering means for financial markets.”
U.S. 30-year bond yields were up three basis points at 3.67 percent and two-year note rates were little changed at 0.30 percent. The Fed is scheduled to buy as much as $20.5 billion of Treasuries through Aug. 23, while the U.S. won’t sell any notes until the auction of five-year Treasury Inflation Protected Securities on Aug. 22.
Indirect investors, which include foreign central banks, won a larger-than-average amount of U.S. bonds at three auctions last week totaling $72 billion. Ten-year notes traded in a range of about nine basis points last week, the narrowest since the five days ended April 26.
Investment-grade corporate bonds are showing signs of life following the biggest losses since 2008 as concern wanes that a Fed pullback from record stimulus will cause a surge in interest rates.
Mutual and exchange-traded funds that focus on dollar-denominated, high-grade notes reported $639 million of deposits in the week ended Aug. 7, the most in more than two months, according to Bank of America Corp. Relative yields on the debt have retraced more than half of an increase that pushed them to a nine-month high in June after Fed Chairman Ben S. Bernanke laid out a timeline for the Fed to begin slowing bond purchases that have bolstered credit markets.
Bonds sold by American International Group Inc. and Morgan Stanley are leading gains of 1.7 percent since the peak in yield spreads as Fed policy makers stemmed a jump in long-term interest rates by stressing they will remain accommodative even if they start scaling back stimulus. With relative yields still more than historical averages, bond buyers have a cushion from climbing rates, according to Wells Fargo Advisors LLC analysts.
About six shares declined for every five that advanced in the Stoxx 600. Ladbrokes Plc fell 2.6 percent as JPMorgan Chase & Co. downgraded its recommendation on the U.K. gambling company. Bilfinger SE rose 3.1 percent after Germany’s second-biggest builder predicted a “significantly” stronger second half.
“Japan has delivered some conflicting data recently,” said Christian Zogg, who manages about $540 million as head of equity and fixed income at LLB Asset Management AG in Vaduz, Liechtenstein. “With such low volumes, it doesn’t take much to pull the market lower, even though general investor sentiment is still positive.”
European stocks have risen half as much as global benchmarks this year, leaving them cheaper than equities in the U.S. and Asia as the region’s economy starts to recover from the longest recession on record.
After a 7.2 percent gain in 2013, the Euro Stoxx 50 Index trades at 12.5 times projected earnings, 6.7 percent less than in 2009, the last time the euro area was in the final quarter of a contraction, data compiled by Bloomberg show. In the U.S., where the economy is in its 10th straight quarter of growth, the S&P 500 is valued at 15.3 times estimated profit and Japan’s Topix trades at 14.2 times income after Prime Minister Shinzo Abe vowed to end two decades of deflation.
Investors from JPMorgan Chase & Co. to Barclays Plc say European stocks are cheap as the first expansion for euro-area manufacturing in two years helps drive forecasts for profit growth of more than 10 percent in 2013 and 2014. Bears point to concern that next month’s German election may lead to a push for tougher austerity measures in Europe’s weakest economies.
The MSCI Emerging Markets Index rose for a third day, adding 0.5 percent, with Brazil’s Ibovespa index climbing 0.9 percent to extend a three-day rally to 6.1 percent, its biggest in almost a year.
The Hang Seng China Enterprises Index advanced 3.4 percent to a two-month high, and the Shanghai Composite Index added 2.4 percent. China’s securities regulator said it will make decisions on financing for real estate projects based on the examination of companies and land ministry assessments, fueling speculation that developers will gain access to equity funding.
Gold futures for December delivery climbed 1.7 percent to $1,334.20 an ounce and silver increased 4.6 percent to $21.339 an ounce. U.S. natural gas jumped 2.5 percent on forecasts for hotter-than-normal weather that would spur demand from power plants. Crude oil increased 14 cents to $106.11 a barrel in New York.