U.S. Stocks Rebound While Treasuries Fall on Factory Data
U.S. stocks rebounded from the worst weekly decline since January and Treasuries fell as better-than-forecast economic data overshadowed concern over Ukraine. Russian shares rallied with the ruble.
The Standard & Poor’s 500 Index gained 1 percent to 1,858.83 following last week’s 2 percent drop. Ten-year Treasury yields rose four basis points to 2.69 percent by 5:11 p.m. in New York. Moscow’s Micex Index surged 3.7 percent after four days of declines. The ruble strengthened while the yen slid against 15 of 16 major peers. Commodities slumped, with corn and wheat retreating amid signs of steady exports from Ukraine amid the political turmoil, while oil lost 0.8 percent.
Factory production in the U.S. rose in February by the most in six months, indicating the industry started to recover after a severe winter. About 97 percent of voters in Crimea chose to leave Ukraine and become part of Russia in a referendum deemed illegal by the U.S. and the European Union. China’s yuan retreated to an 11-month low versus the dollar after the central bank doubled the currency’s trading band.
“There was always fear that it could be worse,” Paul Zemsky, the head of multi-asset strategies at ING U.S. Investment Management, which oversees $200 billion, said by phone from New York. “The world looks a little less dangerous and the U.S. looks a little stronger in its economic growth.”
The S&P 500 gained after declining the most since January last week, erasing its 2014 gains amid mounting tension between Russia and Ukraine and signs of an economic slowdown in China. The index is now up 0.6 percent for the year.
Yahoo! Inc. jumped 4 percent today after Chinese e-commerce company Alibaba Group Holding Ltd. began the process to list shares in the U.S. Hertz Global Holdings Inc. added 4.8 percent after a report that the company will spin off its equipment-rentals unit.
Data from the Federal Reserve showed factory production in the U.S. rose in February. The 0.8 percent gain followed a revised 0.9 percent slump in the prior month that was the biggest since May 2009. The median forecast called for a 0.3 percent advance.
The Fed begins a two-day meeting tomorrow that analysts said will see policy makers further scale back the stimulatory bond buying program. The Federal Open Market Committee has cut monthly purchases to $65 billion from $85 billion in December. Policy makers have indicated they plan to taper by $10 billion at each meeting absent a weakening in the economy.
Fed Chair Janet Yellen said last month that the U.S. economy was strong enough to withstand measured reductions to the central bank’s bond purchases. Three rounds of Fed stimulus have helped push the S&P 500 up 175 percent from a 12-year low, as U.S. equities enter the sixth year of a bull market that started March 9, 2009.
“They’re going to taper down to $55 billion -- the more important element will be forward rate guidance,” said Thomas Simons, a government-debt economist in New York at Jefferies LLC, one of 22 primary dealers that trade with the Fed. “Manufacturing over the last few months showed points of weakness, mostly being attributable to weather. We’re starting to see signs of stabilization.”
Ten-year Treasury yields climbed after dropping 13 basis points, or 0.13 percentage point, last week, the most in two months, Bloomberg Bond Trader data showed.
Global stocks lost $1.4 trillion in value last week amid investor concern over Russia’s actions in Crimea and China’s slowing economy.
The U.S. and EU imposed sanctions on Russia today in the worst dispute between former Cold War foes in more than two decades. EU foreign ministers agreed to freeze assets and impose visa travel bans on 21 Russians, Crimeans and former Ukrainian officials. U.S. measures were aimed at the wealth of Russia’s supporters, the White House said in a statement.
While Western leaders left open the option of extending the sanctions, they kept more punitive steps in reserve.
“The sanctions were a huge factor for the markets,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees $63 billion in assets, said by phone. “Instead of there being outright economic sanctions which could have had trade implications, they were more on an individual basis.”
The Stoxx Europe 600 Index climbed 1.1 percent as about 11 stocks climbed for each that fell. The gauge dropped 3.3 percent last week, the most since January. All but one of 19 industry groups in the measure advanced amid renewed merger-and-acquisition activity.
RWE AG increased 1.3 percent after L1 Energy agreed to buy the utility’s Dea oil and gas unit for 5.1 billion euros ($7.1 billion). Vodafone Group Plc climbed 1.7 percent after the world’s second-largest wireless carrier agreed to buy Spanish cable operator Grupo Corporativo Ono SA for 7.2 billion euros.
Euro-area inflation unexpectedly slowed in February, keeping pressure on the European Central Bank to defend the region against falling prices. Consumer prices rose an annual 0.7 percent, down from an initial estimate of 0.8 percent, the EU’s statistics office in Luxembourg said today.
Russia’s Micex rebounded from a four-year low. Russian stocks have slumped 11 percent this month as the Ukraine crisis intensified following President Vladimir Putin’s decision to send troops into Crimea.
The ruble jumped 0.7 percent against the dollar. The yen declined for the first time in six days, losing 0.4 percent to 101.76 per dollar after appreciating 1.9 percent last week as investors sought a safe haven. Japan’s currency dropped 0.5 percent to 141.68 per euro.
The 17-nation shared currency strengthened 0.1 percent to $1.3922. Switzerland’s franc slipped 0.2 percent to 1.2157 per euro.
The currency “market seems to be very calm,” David Bloom, head of global currency strategy at HSBC Holdings Plc in London, said in an interview on Bloomberg TV’s ‘The Pulse,’’’ with Francine Lacqua and Guy Johnson. “The market is not joining the dots and saying there’s a global problem. The market’s saying these are local isolated problems.”
The S&P GSCI (SPGSCI) gauge of 24 commodities declined 1.1 percent as corn retreated 1.4 percent and wheat fell 1.9 percent. Ukraine loaded close to 700,000 metric tons of corn last week, according to Paris-based farm adviser Agritel, which has an office in Kiev. A Chinese feed mill bought more than 50,000 tons of Ukraine corn, a purchasing manager said. Ukraine is the third-biggest exporter of corn and sixth-largest in wheat.
West Texas Intermediate and Brent crudes declined on speculation that Crimea’s vote to leave Ukraine and join Russia is unlikely to disrupt oil shipments. WTI dropped 0.8 percent to $98.08 a barrel, while Brent fell 1.8 percent to $106.24 in London.
Gold retreated from a six-month high as the U.S. factory data curbed demand for the metal as a safe-haven investment. Futures fell 0.4 percent to $1,372.90.
U.S. natural gas jumped 2.5 percent as cold weather boosted demand for heating fuel.
The MSCI All-Country World Index rose 0.8 percent today following its biggest weekly loss since June. The MSCI Asia Pacific Index dropped 0.2 percent, extending its biggest weekly slump since May 2012. The Hang Seng China Enterprises Index in Hong Kong rose 0.4 percent to snap a five-day drop. The Shanghai Composite Index advanced 1 percent after falling 2.6 percent last week.
Asian stock-index futures rose in recent trading, with contracts on Japan’s Nikkei 225 Stock Average gaining at least 0.9 percent in Osaka and Chicago. Futures on Australia’s S&P/ASX 200 Index added 0.4 percent, contracts on South Korea’s Kospi Index climbed 0.7 percent and futures on the Hang Seng and Hang Seng China Enterprises gauges advanced at least 0.4 percent.
The yuan fell for a second day after the People’s Bank of China said March 15 that the currency will be able to trade as much as 2 percent on either side of a daily central bank reference rate, from 1 percent previously.
The decision underscores pledges from China’s leaders to make the exchange rate more market based and promote freer movement of capital for investment purposes.