Bonds, Gold Drop on Manufacturing While S&P 500 Declines

Government bonds fell around the world after manufacturing grew more than forecast in the U.S., euro area and China. Gold sank and U.S. stocks retreated while the dollar strengthened against most major peers.

Treasury 10-year note yields gained five basis points to 2.80 percent by 4:30 p.m. in New York after German 10-year bund yields climbed five basis points and rates on similar-maturity U.K. gilts jumped eight basis points. Gold dropped more than 2 percent, while oil climbed and natural gas extended its longest rally in more than seven years. The Standard & Poor’s 500 Index fell 0.3 percent to 1,800.90. New Zealand’s currency rose against all 16 major peers and the dollar climbed versus 12.

U.S. manufacturing unexpectedly accelerated in November at the fastest pace in more than two years, pointing to a pickup in business spending that will help propel the economy in early 2014. Improving economic data may cause the Federal Reserve to reduce its monthly bond purchases sooner than investors anticipate. A government report at the end of the week will offer clues as to the outlook for the labor market.

“This week is critical, and it culminates on Friday with the employment report, which will be key,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “We’re seeing economic data beat expectations. This week we’ll see if it’s sustainable. If it does beat expectations, we will see Treasuries soften. People are building in expectations that Fed taper will come sooner than later.”

Treasuries, Gilts

Thirty-year U.S. Treasury yields rose five basis points, or 0.05 percentage point, to 3.86 percent. America’s banks have never been so wary of risking their cash deposits on U.S. government debt. Their $1.8 trillion of the bonds now equal less than 70 percent of their cash, the least since the Federal Reserve began compiling the data in 1973.

New Zealand’s dollar strengthened at least 0.6 percent against all 16 major currencies tracked by Bloomberg. The so-called kiwi climbed 0.8 percent versus Australia’s dollar to a five-year high after government data showed export prices relative to import prices in the smaller economy rose to the highest level in 40 years.

Japan’s currency weakened against most of its 16 major counterparts as Governor Haruhiko Kuroda said the Bank of Japan will keep monetary policy accommodative until inflation is stable at 2 percent. The yen lost 0.5 percent to 102.94 per dollar, the euro slipped 0.4 percent to $1.3541 and the Canadian currency lost as much as 0.4 percent to C$1.0654 per U.S. dollar, its weakest level since October 2011.

Winning Stocks

Global stocks beat all assets for a third month in November, the longest winning streak since 2009. The MSCI All-Country World Index of equities rose 1.5 percent including dividends as China pledged to expand economic freedoms and the European Central Bank cut interest rates.

The S&P 500 has advanced 26 percent this year, on pace for its best yearly gain since 2003, and reached an all-time high Nov. 27.

Telephone, utility and consumer-staples companies were among the worst performers in the S&P 500 today as higher bond yields competed with stocks that pay the biggest dividends. Commodity and health-care companies had the biggest gains.

EBay Inc. rallied 1.6 percent as a report showed online spending on Black Friday rose to a record. Newmont Mining Corp., the world’s second-largest gold producer, slipped 4 percent to a five-year low of $23.83 as prices for the precious metal declined.

Economy Watch

The U.S. Institute for Supply Management’s manufacturing index rose to 57.3 in November, after economists surveyed by Bloomberg called for a drop to 55.1.

Spending on the Black Friday weekend fell for the first time since 2009. Purchases at U.S. stores and websites fell 2.9 percent to $57.4 billion during the four days beginning with the Nov. 28 Thanksgiving holiday, according to a survey commissioned by the National Retail Federation.

The Labor Department’s jobs report due Dec. 6 is forecast to show the U.S. added 180,000 jobs last month and the unemployment rate slipped to 7.2 percent, matching the lowest level in five years. The weakest employment recovery in seven decades is proving a boon to equity markets.

$14 Trillion

Five years into a rally that has restored $14 trillion to share prices, U.S. payrolls remain 1.5 million below the level reached in 2008, according to data compiled by Bloomberg. Resistance to hiring from ConocoPhillips to Walt Disney Co. will help push S&P 500 profit margins above 10 percent next year, the highest ever, data show. Below-average employment was cited last month by Federal Reserve chairman nominee Janet Yellen as the biggest obstacle to raising interest rates.

The Stoxx Europe 600 Index fell 0.3 percent today as almost three stocks declined for every one that rose in the regional benchmark today. The Stoxx 600 gained 0.9 percent in November for a third consecutive monthly gain. The gauge has climbed 16 percent this year.

ThyssenKrupp AG slumped 8.5 percent after Germany’s largest steelmaker said it will sell equity equivalent to as much as 10 percent of its market value. ThyssenKrupp agreed to sell its U.S. steel plant to ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. for $1.55 billion, the Essen-based company said in a Nov. 29 statement. ArcelorMittal gained 1.3 percent.

Manufacturing in the euro-area expanded, with Markit Economics’s factory index rising to 51.6 in November. The gauge in Spain fell to 48.6, the lowest since May, compared with a forecast of 51.1.

Asian Markets

The MSCI Asia Pacific Index dropped 0.3 percent as Japan’s Topix Index rose less than 0.1 percent, while Australia’s S&P/ASX 200 Index slid 0.8 percent. Hong Kong’s Hang Seng Index added 0.7 percent and India’s S&P BSE Sensex Index gained 0.5 percent.

Manufacturing indexes in China beat estimates for November as gauges in South Korea, India and Taiwan climbed.

A Chinese index of small companies tumbled by a record after the government said it will resume initial public offerings. China’s securities regulator said 50 companies will be ready for IPOs by the end of January as authorities prepare to lift a more than one-year ban on new listings.

The Shanghai Composite Index dropped 0.6 percent, while the ChiNext Index sank 8.4 percent, paring this year’s gain to 76 percent. There are more than 760 companies in line for approval and it will take about a year to complete an audit of all the applications, the regulator said on Nov. 30.

‘Fund Rotation’

“Investors are weighing the positive economic data that’s coming out from the different markets, trying to gauge if these are sufficient to extend the rally on equities,” Jonathan Ravelas, chief market strategist at BDO Unibank Inc., said in Manila. “The resumption of China IPOs will spur fund rotation to the newcomers on hopes these will provide better returns.”

China’s official manufacturing purchasing managers’ index came in at 51.4 for November, matching the 18-month high reached in October. The median projection in a Bloomberg News survey was for 51.1, with levels above 50 signaling expansion. A separate gauge from HSBC Holdings Plc and Markit Economics was 50.8, topping estimates. HSBC/Markit’s manufacturing index for South Korea rose to 50.4 from 50.2, while a measure for Taiwan output climbed to 53.4 from 53.

The MSCI Emerging Markets Index slipped 0.5 percent, snapping a three-day gain.

The Thai baht touched the weakest level since Sept. 9 versus the dollar as the central bank warned a political standoff was hurting Southeast Asia’s second-largest economy. Protesters seeking Prime Minister Yingluck Shinawatra’s ouster vowed to incite more unrest after three deaths at the weekend.

Emerging Markets

PT Bank Rakyat Indonesia led a 1.5 percent gain in the Jakarta Composite Index and the rupiah jumped 1.7 percent after data showed a surprise trade surplus. Indian shares climbed to the highest level in almost a month after data showed economic growth quickened last quarter from a four-year low.

Gold for immediate delivery fell for the first time in three sessions, declining 2.7 percent to $1,219.81 an ounce. Copper declined 1.1 percent to $6,975 a metric ton on the London Metal Exchange, while aluminum lost 0.7 percent to $1,742.50 a ton, a four-year low.

Crude oil rose 1.2 percent to $93.82 a barrel in electronic trading on the New York Mercantile Exchange as the economic data from the U.S. to China signaled greater fuel demand in the world’s biggest oil-consuming countries. Natural gas rose for an eight-straight day, adding 0.3 percent for its longest rising streak since October 2006.

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