Stocks Rise With Treasuries on GDP Data While Gold Slides
Stocks rose around the world as Chinese money-market rates decreased and slower-than-estimated U.S. economic growth spurred speculation the Federal Reserve will be in no rush to reduce stimulus. Treasuries rallied while silver and gold sank to the lowest since 2010.
The MSCI All-Country World Index advanced 1 percent at 4 p.m. in New York and the Standard & Poor’s 500 Index added 1 percent to 1,603.26, extending its two-day advance to almost 2 percent. The cost of locking in China’s interest rates fell for a fourth day, the longest run of declines since February. Gold and silver slumped more than 3 percent as the Dollar Index climbed for a sixth straight day, its longest rally in 13 months. Treasury 10-year note yields lost seven basis points to 2.54 percent.
Global equities declined about 4.1 percent in June, trimming this year’s gain to 3.7 percent, as the Federal Reserve said it may taper monetary stimulus and investors speculated rising Chinese funding costs will slow its economy. German consumer confidence is set to increase next month, an industry report showed today, while the U.S. revised lower its reading for first-quarter economic growth. China’s central bank will use tools to safeguard money-market stability and tight liquidity is set to ease, it said yesterday.
“We’ve had a relatively sharp selloff over a couple of days and we’re getting a bounce here,” James Gaul, a portfolio manager at Boston Advisors LLC, which oversees about $2.6 billion in assets, said in a phone interview. “Weaker economic numbers may be met with favor by the market because it can suggest that the Fed can slow the tapering process or not taper if the economy looks weaker than expected.”
The S&P 500 extended yesterday’s 1 percent advance and trimmed its June decline to 1.7 percent. The benchmark index is up 2.2 percent in the second quarter and 12 percent in 2013.
Gross domestic product expanded at a revised 1.8 percent annualized rate from January through March, down from a prior estimate of 2.4 percent, figures from the Commerce Department showed today in Washington. Household purchases, which account for about 70 percent of the economy, were revised to a 2.6 percent advance compared with the 3.4 percent gain estimated last month.
Federal Reserve Bank of Richmond President Jeffrey Lacker said he expects the U.S. expansion to remain “sluggish” for “a couple more years,” and today’s downward revision to first-quarter growth is in line with his outlook. Lacker said he sees growth of about 2.25 percent next year.
“The economy is telling us this is about all we’re capable of right now,” Lacker, who doesn’t vote on the Federal Open Market Committee this year, said today in a Bloomberg Television interview with Peter Cook. “We’re going to continue to get growth at a fairly disappointing rate going forward.”
Citigroup Inc. and Bank of America Corp. paced an advance in banks, climbing at least 0.7 percent. Boeing Co., Home Depot Inc. and Microsoft Corp. jumped at least 2 percent to lead gains in the the Dow Jones Industrial Average. Barrick Gold Corp. and Newmont Mining Corp. fell more than 5 percent, leading a selloff in precious-metal producers.
The Stoxx Europe 600 Index climbed 1.7 percent, extending its rebound from a six-month low as 18 of 19 industry groups advanced. The volume of shares changing hands in Stoxx 600 companies was in line with the 30-day average, according to data compiled by Bloomberg. The VStoxx Index of options prices on the Euro Stoxx 50 Index fell for a second day, losing 6.6 percent to this week’s low of 22.55.
Colruyt SA jumped 8.3 percent, the most in almost a year, after Belgium’s biggest discount food retailer reported earnings that topped estimates. Afren Plc, a U.K. oil explorer in Africa and northern Iraq, rallied 7.3 percent after discovering a “significant” light oil field in Nigeria.
The Stoxx 600 has retreated 5.4 percent in June, poised for its first monthly decline since May 2012. The gauge fell 3.2 percent this quarter, trimming this year’s advance to 1.7 percent.
The MSCI Emerging Markets Index rose for a second day, adding 1.9 percent for its biggest gain since January. The gauge has dropped 11 percent so far this month, extending its 2013 decline to 14 percent. That compares with a 6.5 percent gain this year for the MSCI World Index of developed countries.
The Hang Seng China Enterprises Index of mainland companies rallied 3.3 percent, rebounding from the lowest level since October 2011. The one-year swap, the fixed cost needed to receive the floating seven-day repurchase rate, slid 20 basis points to 3.875 percent. The overnight repo rate dropped 40 basis points to 5.6 percent, according to a daily fixing compiled by the National Interbank Funding Center. It reached a record 12.85 percent on June 20 and has averaged 3.14 percent this year.
The People’s Bank of China has provided liquidity to some financial institutions to stabilize money-market rates, according to a release yesterday. The statement is the first public confirmation of central bank action to ease a crunch that sent the overnight repurchase rate to a record. Premier Li Keqiang is seeking to wring speculative lending out of the banking system after credit expansion outpaced economic growth.
“The Chinese central bank’s liquidity pledge has calmed markets in the short term, but the picture is not that clear in the medium term,” said Jean-Paul Jeckelmann, chief investment officer at Banque Bonhote & Cie. in Neuchatel, Switzerland, who helps manage $1.4 billion in equities.
European Central Bank policy makers including President Mario Draghi said they’ll maintain a loose monetary stance for as long as needed, while urging euro area governments to cut their deficits and boost investment.
The ECB’s monetary policy “will stay accommodative for the foreseeable future,” Draghi said today in a speech at the French National Assembly in Paris. “We have an open mind about all other possible instruments that we may consider proper to adopt.” An exit is “very distant,” he said at a press conference.
European bond markets rallied, with Spain’s 10-year yield falling 23 basis points to 4.85 percent, Italy’s decreasing 15 points to 4.70 percent, Germany’s dropping four basis points to 1.77 percent and Britain’s declining eight basis points to 2.46 percent.
Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE index fell for the first time in seven days yesterday. The measure dropped to 108.44 after reaching 110.98 on June 24, the highest since November 2011. It has averaged 61.91 this year.
Securities in the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index lost 2.30 percent this quarter through yesterday, set for the worst performance since the indexes began tracking the data on Dec. 31, 1996. While the average yield on the securities climbed to 1.79 percent from 1.43 percent on March 31, it is still below the mean of 2.06 percent for the past five years.
The Dollar Index gained 0.5 percent today, leaving it little changed for the quarter. The euro weakened for a sixth day against the dollar, slipping 0.5 percent to $1.3009.
The JPMorgan Global FX Volatility Index rose to 11.52 percent after touching 11.96 percent on June 24, the highest since June 2012. The average for 2013 is 9.2 percent. Three-month implied volatility on the Australian dollar has risen the most of 16 major currencies tracked by Bloomberg this quarter.
The S&P GSCI gauge of 24 commodities lost 0.1 percent, paring an earlier slide of as much as 1 percent. Gold for immediate delivery fell to $1,226.22 an ounce, and is heading for a quarterly drop of 23 percent, the most since at least 1920. Silver is down 34 percent for the second quarter, the most since 1980. Silver and gold fell to the lowest price since 2010 today.
Copper dropped 1.2 percent and West Texas Intermediate oil fluctuated near $95 a barrel.
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