Treasuries Slip While Dollar Gains; Greece Outlook Boosts Stocks

Updated on

Treasuries fell, while the dollar rallied versus the euro amid prospects U.S. interest rates will be increased while Europe maintains stimulus efforts. The Standard & Poor’s 500 Index neared a record and shares from Germany to France jumped amid optimism Greece will clinch a bailout deal.

Yields on 10-year Treasury notes climbed a second day, adding four basis points to 2.41 percent by 5 p.m. in New York, as the dollar gained 1.5 percent to $1.1167 per euro. The S&P 500 rose 0.1 percent to close about half a percentage point from an all-time high, while the Nasdaq Composite Index and Russell 2000 Index set fresh records. The Stoxx Europe 600 Index capped its biggest two-day gain since January. Gold extended losses as oil advanced before U.S. stockpiles data.

Greece’s prime minister needs to muster support from fellow lawmakers for plans aimed at staving off a default, amid signs the standoff with creditors is easing. While the European Central Bank is in the full throes of quantitative easing, the Federal Reserve is moving closer to tightening policy, with data firming the case for higher rates. New home purchases rose at the strongest pace since 2008 in May, a report Tuesday showed, even as tepid manufacturing growth drags on the the economy.

“There are quite a few cross currents going on today,” said Jim Paulsen, chief investment strategist at Wells Capital Management Inc. in Minneapolis, which oversees $351 billion. “You’ve still got Greece in the background. The next crisis in the room is waiting in the wings with the Fed. There are a lot of people wondering if the S&P 500 can establish a record high and build more strength.”

Fed Outlook

The S&P 500 rose to 2,124.27 Tuesday after fluctuating between gains and losses throughout the session. The gauge ended seven points below its May 21 record, and is coming off its best week since April after Federal Reserve Chair Janet Yellen said that the central bank will take a gradual approach to raising U.S. rates.

The chances are about 50-50 that the U.S. economy will improve enough for the central bank to boost borrowing costs in September, said Fed Governor Jerome Powell, who also expects policy makers to move again in December.

Among shares moving Tuesday, Freeport-McMoRan Inc. jumped 3.7 percent as copper prices rebounded. Facebook Inc. also climbed 3.7 percent to a record after previewing a number of new ad formats for its mobile-phone platform. AT&T Inc. gained 2.5 percent to lead phone stocks higher.

In Europe, Greece’s ASE Index rose 6.1 percent and Portugal’s PSI 20 Index added 3.2 percent for the biggest gains among western European markets Tuesday.

VAT Dispute

Greek Prime Minister Alexis Tsipras is seeking to shore up support at home for proposals aimed at ending the indebted nation’s five-month standoff with creditors. A key sticking point is the rate of value-added tax, with the proposed target for 2016 short of creditor demands, according to two European Union officials. Euro-area finance ministers meet Wednesday to try and secure an agreement to prevent Greece from defaulting.

Spanish and Italian sovereign securities extended gains Tuesday as the potential for a deal made investors more comfortable owning higher-yielding euro-area debt.

“The pessimism has been very, very high and so there has to be relief” over Greece, Scott Thiel, who helps oversee BlackRock Inc.’s $4.8 trillion of assets as chief investment officer for fundamental fixed income, said a Bloomberg TV interview. “They’ll get some kind of agreement so they’ll be able to meet their obligations.”

Base Metals

The euro plunged the most since March 19 as Goldman Sachs Group Inc. said European QE will send the shared currency toward parity versus the greenback. Bloomberg’s Dollar Spot Index, a gauge of the U.S. currency versus 10 major peers, climbed 0.7 percent in a third straight day of gains.

The MSCI Emerging Markets Index added 0.3 percent to close at its highest level since June 3.

Copper rose the most in almost two months after a private gauge of Chinese manufacturing indicated the industry is regaining ground. Nickel soared 3.6 percent in London. China is the world’s biggest consumer industrial metals consumer.

Gold fell a third day as signs of potential progress on Greece dimmed the appeal of haven assets. Futures for August delivery declined 0.6 percent to settle at $1,176.60 an ounce in New York. Its three-session slump was longest since June 5.

Oil futures reversed losses in London and New York. West Texas Intermediate crude gained 1 percent to settle at $61.01 a barrel before U.S. government data forecast to show crude stockpiles declined for an eighth week. Brent advanced 1.8 percent to $64.45 per barrel.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE