Bonds fell from the U.S. to Germany, deepening a selloff that has sent yields to the highest levels this year. Oil jumped on speculation American output will wane, while the Standard & Poor’s 500 Index halted a three-day slide.
Yields on 10-year Treasury notes rose six basis points to
2.44 percent by 5 p.m, in New York, near their highest level since October. Rates on similar-maturity German bunds climbed seven basis points to 0.95 percent. The S&P 500 added less than
0.1 percent amid a mixed day for U.S. stocks, while emerging-market shares extended their longest slide since 1990. U.S. crude soared 3.4 percent. Copper advanced a third day.
Investors demanded the highest yields in four years on three-year Treasury notes sold Tuesday, amid mounting bets the Federal Reserve will boost borrowing costs this year. European bonds dropped as signs of a pickup in the economy raised concern that demand will fall. Oil advanced on projections U.S. shale output will fall through July. MSCI Inc. said local Chinese stocks are on track to being included in its benchmark indexes.
“There’s risk being taken off the table,” Larry Peruzzi, director of international trading at Cabrera Capital Markets LLC in Boston, said by phone. “It’s a split market globally where some people are finding need to stimulate, others are raising rates and some don’t know what to do, and it leaves a lot of people trying to reevaluate what’s going on. You also have the Greek situation that just goes on and on.”
The U.S. sold $24 billion of three-year securities, the first of three sales over the next two days totaling $58 billion. Data earlier on Tuesday showed the euro-area economy expanded in the first quarter.
Producers of consumer staples led gains in U.S. equities, as Procter & Gamble Co. jumped 1.5 percent. Banks also advanced as higher yields attracted buyers. The S&P 500 is down 2.4 percent from its May 21 record.
U.S. stocks have fluctuated as investors weigh economic data to determine the timing of the Fed’s first rate increase since 2006. Reports on consumer sentiment and retail sales are due this week, both of which are forecast to support the idea of an improving economy. Jobs data last week showed the strongest hiring in five months and the biggest wage gains in two years.
“Equities are struggling to maintain their swagger and it appears we’re transitioning to a wait-and-see mode as investors look forward to the dog days of summer, second-quarter earnings and the Fed raising rates,” Terry Sandven, who helps oversee $126 billion as chief equity strategist at U.S. Bank Wealth Management in Minneapolis, said by phone. “There’s anecdotal evidence for the Fed to raise rates this year and we’re likely to trend sideways based on complacency and uncertainty.”
The timing of the Fed’s rate decision is also leading to fluctuations in the dollar. The greenback jumped 1.1 percent versus the euro June 5 after the jobs data, only to wipe out that gain on Monday after a French official told reporters U.S. President Barack Obama said that dollar’s strength could be a problem.
The U.S. currency was little changed at $1.1279 per euro Tuesday, after sliding 1.6 percent on Monday. It was also steady at 124.34 yen after reaching 125.86 on June 5, the highest level since June 2002. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fell 0.1 percent.
Greece submitted fresh proposals to its creditors in a bid to unlock bailout funds, as Group of Seven leaders continued to meet in Germany. The standoff over Greece’s debt crisis is heightening anxiety in global markets, with the country set to run out of funding in three weeks. Spanish government bonds rose with their Italian peers amid tentative signs of progress.
The Stoxx Europe 600 Index capped a sixth day of declines, the longest slide since December. Germany’s DAX Index dropped
0.6 percent after entering a correction on Monday and is down 11 percent from its April peak.
Chinese equities fell before MSCI’s statement, with the Shanghai Composite Index down 0.4 percent, dropping from a seven-year high. Hong Kong’s Hang Seng China Enterprises Index slipped 1.8 percent.
Mainland Chinese stocks will probably be added to MSCI’s emerging-markets measure, the index provider said in a statement late Tuesday in New York. The shares will likely be added to global benchmarks after “a few important remaining issues related to market accessibility have been resolved.”
MSCI’s plans will probably be supportive for Chinese equities because it’s likely they’ll be included before June 2016, Brian Jacobsen, who helps oversee $250 billion as the chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, said by phone.
“A lot of people are probably going to want to position their portfolios in anticipation of the A shares being included,” he said, referring to mainland-traded stocks. “China has the benefit of a fast and streamlined regulatory process by which they should be able to resolve these issues. I would actually be surprised if it takes more than three months to get the A shares included.”
The Bloomberg China-US Equity Index, a gauge of Chinese stocks listed in New York, fell 0.9 percent before the announcement, which came after U.S. markets closed.
The MSCI Emerging Markets Index slid 0.6 percent in its 12th day of losses. The Philippines benchmark led declines, retreating more than 2 percent, and Taiwan’s main index lost 1.9 percent.
West Texas Intermediate crude for July delivery climbed to $60.14 a barrel, while Brent jumped 3.2 percent to $64.70.
Output from prolific tight-rock formations will decline through July to the lowest level since January, the Energy Information Administration reported Monday. U.S. crude stockpiles probably dropped for a sixth week as refiners prepared to meet increased fuel demand in the summer, a Bloomberg survey showed.
Copper futures rose 0.6 percent to $2.714 a pound on the Comex in New York, its longest rally in five weeks, after a bigger-than-expected drop in Chinese price growth fueled speculation the country will embark on more stimulus measures. China is the world’s biggest consumer of industrial metals.