Treasuries tumbled with European bonds, while the euro strengthened the most in 10 weeks versus the dollar as inflation in the region accelerated more than forecast. U.S. stocks fluctuated, and oil advanced.
Yields on 10-year Treasury notes climbed eight basis points to 2.26 percent by 5 p.m. in New York, the biggest jump in two weeks. The euro surged 2.1 percent to $1.1151, while the Bloomberg Dollar Spot Index sank 1.3 percent. The Standard & Poor’s 500 Index closed down 0.1 percent after swinging between gains and losses. U.S. crude rallied to a six-month high.
The first increase in euro-area consumer prices in six months reignited a selloff in European and U.S. debt, spurring speculation over the outlook for European Central Bank stimulus. Meanwhile, there was evidence of greater urgency in efforts to break the deadlock over Greece, with the first of four repayments in June to the International Monetary Fund due Friday. Federal Reserve Governor Lael Brainard said a recent run of weak data casts doubt over the U.S. economy’s strength.
“Europe is getting smoked and that’s part of what’s going on here,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, one of 22 primary dealers that trade with the Fed. “There’s better data in Europe and in the U.S. It’s data driven -- every meeting is in play. All these things are putting pressure on bonds.”
The S&P 500 slipped as much as 0.6 percent, bottoming at 2,099, its average price for the past 50 days, before erasing the decline. It rose 0.3 percent in midday trading. Five of its 10 main industry groups advanced for the day, with commodity producers leading gains as the dollar retreated.
A decline in U.S. factory orders in April added to mixed economic data as the Fed weighs raising interest rates. Reports Monday showed manufacturing expanded more than forecast in May, while consumer purchases unexpectedly stalled in April. Labor market reports on private payrolls growth, jobless claims and the government’s monthly jobs data are all due later this week.
The S&P 500 fluctuated between gains and losses on Monday before closing higher for the first time in three sessions. The gauge has fallen 1 percent from its May 21 all-time high, trimming its advance in 2015 to 2.6 percent.
“Yesterday was a microcosm of what we’ve seen for several months now -- big intraday swings, only to end up little changed,” said Matt Maley, an equity strategist at Miller Tabak & Co. in Newton, Massachusetts. “The focus is on Friday’s big employment number, and there’s a lot of indecision. If the situation in Greece deteriorates, it leaves a lot of downside potential for the U.S. stock market.”
The inflation data from Europe ease concern among European Central Bank policy makers that the region will suffer from deflation, one of the threats that prompted them to start a quantitative-easing program this year. ECB officials are due to gather in Frankfurt on Wednesday to set monetary policy.
Yields on Germany’s 10-year bunds climbed 17 basis points, or 0.17 percentage point, to 0.71 percent, their biggest one-day gain since August 2012. Spain’s 10-year bond yields rose 13 basis points to 2.09 percent, the most since November. Similar-maturity Italian bond yields touched 2.13 percent, also the highest level since November.
The euro gained against all but one of its 16 major counterparts, advancing 1.5 percent versus the yen and 1.1 percent against the pound. The yen strengthened 0.5 percent to 124.11 per dollar, after earlier depreciating to 125.05, the weakest level since Dec. 6, 2002.
The Stoxx Europe 600 Index dropped for the third time in four days, with food and beverage companies leading the index to a two-week low. The ASE Index slipped 2.5 percent to a one-month low, as Greek markets resumed following a holiday.
“People obviously are still focused on Greece, will they or will they not come to an agreement?” said Peter Dragicevich, a foreign-exchange strategist at Commonwealth Bank of Australia in London. “It’s more likely than not that they come into some agreement. But in the past we have seen everything fall apart.”
The MSCI Emerging Markets Index slipped 0.3 percent for a seventh day of losses in the longest slump since March. India’s S&P BSE Sensex Index tumbled 2.4 percent on concern Tuesday’s interest-rate cut won’t be enough to spur growth. Hyundai Motor Co. sank to a four-year low after reporting lower sales as Korea’s Kospi Index slid a second day. The Ibovespa rose as Brazil’s industrial production contracted less than forecast.
Oil climbed to the highest level since Dec. 9 on speculation data this week will show that U.S. inventories capped their longest stretch of declines since August. West Texas Intermediate crude for July delivery jumped 1.8 percent to $61.26 a barrel in New York.
Copper futures snapped their longest retreat in three months after China said it will allow lenders to issue certificates of deposits to individuals and companies, the central bank’s latest move to free up interest rates. Contracts for July delivery rose 0.6 percent to settle at $2.736 a pound on the Comex in New York. The metal dropped in the previous six sessions, the longest slump since March 3.