Yen Rallies on G-7 Comments as U.S., Europe Stocks Gain

The yen jumped as an official from the Group of Seven nations said the countries are concerned about volatility in Japan’s currency. U.S. stocks advanced as investors dissected earnings reports and awaited President Barack Obama’s State of the Union speech tonight.

The yen climbed 0.8 percent to 93.57 per dollar at 4 p.m. in New York, paring a gain of as much as 1.4 percent. The Standard & Poor’s 500 Index added 0.2 percent to 1,519.43, the highest level since November 2007 on a closing basis, and the Stoxx Europe 600 Index closed up 0.5 percent. Spain’s 10-year bond yield fell 10 basis points to 5.32 percent. Industrial metals led commodities higher, while corn slid for an eighth day in its longest slump since 2010.

Japan’s currency was higher against all 16 major peers after the G-7 official, who requested not to be further identified, said the group is concerned about excess moves in the yen and investors misinterpreted an earlier statement on exchange rates. The clarification came hours after the world’s major industrial economies appeared to signal acceptance for a weaker Japanese currency so long as Prime Minister Shinzo Abe’s government didn’t actively pursue devaluation.

“It was a vague, bland statement at first,” Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said by telephone from Washington, D.C. “When we got the subsequent clarification, it showed officials were really concerned about the pace of yen weakness, which they seem to see as a potential threat to global growth.”

Yen Watch

The yen has weakened 18 percent against the dollar since its 2012 high in February amid speculation of further stimulus measures to bolster Japan’s economy. The yen slumped against the dollar yesterday as Haruhiko Kuroda, a possible contender for Bank of Japan governor, said additional monetary easing could be justified this year. U.S. Treasury Undersecretary Lael Brainard said she supports Japan’s effort to end deflation after the yen slid for four straight months through the end of January.

The yen climbed 0.5 percent to 125.79 per euro. The Dollar Index, a gauge of the U.S. currency against six major peers, slipped 0.3 percent to 80.06. The pound weakened against 13 of 16 major peers as U.K. inflation last month held at the highest since May.

G-7 Confusion

G-7 finance ministers and central-bank governors said in the earlier statement released in London, “we reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates.” They will join officials from the G-20, which includes the G-7 and emerging markets such as Brazil, China and India, in Moscow on Feb. 15-16.

The yen pared gains after a U.K. official said the G-7 statement on exchange rates today is not about an individual country or currency. The official spoke on condition of anonymity.

“Officially, the most important countries are not singling out Japan,” Douglas Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York, said in a telephone interview. “People understand that if anyone’s going to have their feet to the fire right now in terms of currency weakness, it’s going to be Japan. But it’s very hard for most countries to throw stones because they’re all living in glass houses.”

Among U.S. stocks, Michael Kors Holdings Ltd. rallied 8.8 percent after raising its forecast in anticipation of a jump in same-store sales. Avon Products Inc. jumped 20 percent as adjusted profit topped analysts’ estimates.

Facebook Inc. sank 3.2 percent as Sanford C. Bernstein & Co. cut its recommendation. Coca-Cola Co. slipped 2.7 percent after global volume sales missed analysts’ estimates.

Earnings Season

Earnings have exceeded the average analyst estimate at about 74 percent of the 354 companies in the S&P 500 that released results so far in the earnings season, and 66 percent have beaten sales estimates, data compiled by Bloomberg show.

The S&P 500 has rallied almost 7 percent in 2013 as U.S. lawmakers reached a budget compromise. The gauge is about 3 percent below its record reached in October 2007. The index has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond-buying to lower interest rates and boost economic growth.

Obama tonight will propose spending on infrastructure, clean energy and education, according to an administration official briefed on the speech. His argument, directed at congressional Republicans amid a battle over fiscal policy, is that fostering economic growth is the best strategy to narrow a federal budget gap that has exceeded $1 trillion in each of the last four years.

European Markets

Today’s gain trimmed the Stoxx 600’s drop from this year’s high on Jan. 29 to 1.1 percent. The volume of shares changing hands in Stoxx 600 companies was 11 percent lower than the 30-day average, according to data compiled by Bloomberg.

Barclays Plc climbed 8.6 percent as the U.K. bank said it will eliminate 3,700 jobs to reduce costs after posting its first full-year loss in more than two decades. L’Oreal SA, the world’s largest cosmetics maker, rallied 3.8 percent as earnings increased.

Finmeccanica SpA, Italy’s biggest defense company, plunged 7.3 percent as two people familiar with the matter said Chief Executive Officer Giuseppe Orsi was arrested amid a probe of possible bribes paid to win the sale of 12 helicopters to India.

Barclays Cuts

Spanish and Italian bonds advanced as the two nations auctioned a total of 14 billion euros ($18.8 billion) of bills. The yield on Spain’s two-year notes slipped 10 basis points to 2.69 percent, and the rate on similar-maturity Italian debt lost eight basis points to 1.66 percent.

The MSCI Emerging Markets Index was little changed and is up 0.4 percent for the year. That compares with a 5.6 percent gain in 2013 for the MSCI World Index of developed nations. Sixty-one percent of companies in the MSCI gauge for emerging markets have reported quarterly profit that missed estimates, almost twice the rate for developed nations, Bloomberg data show.

South Korea’s Kospi Index closed 0.3 percent lower, erasing a 0.4 percent advance, after North Korea tested a nuclear weapon. Poland’s WIG20 Index lost 1.1 percent as Telekomunikacja Polska SA, the nation’s largest phone company, tumbled 28 percent after cutting its dividend proposal for the second time in four months. India’s Sensex Index jumped 0.5 percent, snapping an eight-day rout. Indonesia’s benchmark gauge jumped 1 percent. Markets in China, Taiwan, Malaysia and Vietnam are shut for Lunar New Year.

Nickel and lead added more than 1 percent for the biggest gains in the S&P GSCI Index of commodities, while sugar, wheat and cotton retreated. Oil rose 0.5 percent to $97.51 per barrel in New York.

Corn dropped 0.9 percent for an eighth-straight decline in Chicago, capping the longest losing streak since March 2010, as prospects improved for crops in South America. Soybeans slumped into a bear market. Corn and soybean growing areas in Argentina may receive moderate to heavy rainfall from storms beginning Feb. 16, easing dry conditions, DTN said today in a forecast.

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