Treasuries Rise as Commodities, Stocks Fall on Budget
Treasury 10-year notes advanced, while commodities and U.S. stocks retreated, after President Barack Obama held his ground about raising tax rates for the highest-income Americans. The dollar weakened.
Yields on 10-year notes slipped two basis points to 1.60 percent at 4 p.m. in New York while the S&P GSCI gauge of commodities slid 0.9 percent as cocoa and silver led declines. The Standard & Poor’s 500 Index lost 0.2 percent to 1,407.05. The Dollar Index slipped 0.3 percent for a fifth straight decline, its longest slump in more than a year. The Stoxx Europe 600 Index (SXXP) of stocks closed less than 0.1 percent higher after rallying 0.4 percent earlier.
Obama said in a Bloomberg Television interview that a Republican offer on resolving the so-called fiscal cliff doesn’t go far enough and won’t raise the revenue needed to shrink the deficit by $4 trillion over the next decade. The administration’s rejection of a Republican plan that omits higher tax rates for top-earning Americans leaves the issue unresolved with about four weeks left before more than $600 billion in tax increases and spending cuts start taking effect.
“The clock is ticking,” said Quincy Krosby, market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion. “The focus is on what goes on in Washington. The market will be volatile. You’ve got to be very well-hedged given that the market is so much headline-driven.”
President Obama sketched out a potential year-end deal pairing tax increases and spending cuts to avert the so-called fiscal cliff, while insisting Republicans must accept higher tax rates for top earners as a condition for negotiations.
‘Poised to Take Off’
“We have the potential of getting a deal done,” Obama said at the White House today on Bloomberg TV in his first interview since winning re-election. “We’re going to have to see the rates on the top 2 percent go up, and we’re not going to be able to get a deal without it,” he said. “America is poised to take off” once a deal is reached, he said.
Treasury yields remained lower after Obama’s interview and bond purchases by the Federal Reserve. The Fed bought $1.87 billion of Treasuries are part of its program to keep borrowing rates low to spur economic growth.
Economists have cut their forecasts for the yield at the end of this year to the lowest since Bloomberg began surveying for the projection, on concern U.S. politicians will struggle to avert the fiscal cliff. The 10-year rate will probably be 1.64 percent by Dec. 31, less than the 1.75 percent rate that economists saw at the start of November, according to Bloomberg surveys of the predictions.
Gauges of health-care, industrial and commodity companies in the S&P 500 advanced, while telephone, utility and energy shares led losses among the 10 main groups. Las Vegas Sands Corp. and Wynn Resorts Ltd. slid more than 2.7 percent each on bets China may increase scrutiny of junket operators in Macau, who provide credit to high-stake gamblers.
Among European stocks, Alcatel-Lucent SA rose 2.6 percent after the company was said to be closer to obtaining financing of at least 1 billion euros ($1.3 billion). TUI Travel Plc gained 3.4 percent after Europe’s largest tour operator reported earnings that topped analyst estimates. United Internet AG tumbled 8.3 percent as Warburg Pincus LLC offered its 5.5 percent stake for sale.
The dollar depreciated against 14 of 16 major peers, losing 0.3 percent to $1.3096 per euro after reaching $1.3108, the weakest level since Oct. 18. It dropped 0.5 percent against the yen.
Australia’s dollar rose against 14 of 16 major peers, climbing 0.5 percent to $1.0475, as the central bank said demand outside the mining industry may rise after cutting interest rates to a half-century low of 3 percent. The Swiss franc slipped 0.4 percent to 1.2129 per euro, the weakest level since October.
Carbon dioxide permits fell as much as 4.5 percent to 5.68 euros a metric ton, the lowest since they started trading in April 2005 on ICE Futures Europe in London. The European Union commission asked its 27 members to indicate Dec. 13 whether they support a plan to tackle a glut in the market.
India’s Sensex gained 0.2 percent as Parliament began debating whether to allow overseas supermarkets to enter the country before voting on the issue tomorrow.
The Shanghai Composite Index (SHCOMP) increased 0.8 percent, rebounding from the lowest level since January 2009. The Chinese gauge will rally 48 percent within nine months after its decline below 1,960 signaled selling has climaxed, according to Tom DeMark, the creator of indicators to show turning points in securities.
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