Stocks, Europe Bonds Rise; Commodities Snap Five-Day DropStephen Kirkland and Nick Taborek
U.S. stocks halted a three-day slide as declining German unemployment stoked gains in European shares and bonds. The dollar climbed after the U.S. trade deficit shrank to a four-year low while commodities snapped their longest drop since November, led by gasoline and heating oil.
The Standard & Poor’s 500 Index added 0.6 percent by 4:41 p.m. in New York after losing 1.2 percent in the first three sessions of 2014. The Stoxx Europe 600 Index gained 0.7 percent to the highest close since May 2008. Spain’s 10-year yield lost as much as 11 basis points to a the lowest level since December 2009 and Ireland’s 10-year yield reached an eight-year low. The Bloomberg U.S. Dollar Index rose 0.3 percent. Gasoline, cotton and heating oil led the S&P GSCI materials index up 0.2 percent.
U.S. equities followed European shares higher as data showed German joblessness fell for the first time in five months and amid signs of demand for bonds in the region. Ireland raised 3.75 billion euros ($5.11 billion) selling debt and Petroleo Brasileiro SA led a surge in corporate bond sales in Europe. In the U.S., the trade report added to signs of a recovery in the world’s largest economy before the Federal Reserve releases minutes of its last meeting and ahead of jobs data this week.
“Equities are the place to be,” John Lynch, the Charlotte-based regional chief investment officer for Wells Fargo Private Bank, said by phone. His firm manages $170 billion. “Everyone’s waiting on the Fed minutes tomorrow. And the job report on Friday could be a driver of further confidence.”
The S&P 500’s three-day slide marked the longest stretch of declines to start a year since 2005. The index rallied 30 percent in 2013 for its biggest annual jump since 1997.
Gauges of health-care and technology companies, along with utilities, rose at least 0.9 percent to lead gains in nine of the 10 main industry groups in the S&P 500 today, with only raw-material producers retreating.
UnitedHealth Group Inc. and Johnson & Johnson rose more than 2 percent, leading a 0.6 percent gain in the Dow Jones Industrial Average, after brokerages raised their stock ratings. Convergys Corp. jumped 7.3 percent after saying it will buy Stream Global Services Inc. for $820 million.
JPMorgan Chase & Co. lost 1.2 percent for the biggest decline in the Dow. The bank agreed to pay $1.7 billion to settle U.S. claims that it facilitated Bernard Madoff’s Ponzi scheme, the largest in U.S. history, resolving yet another legal obstacle facing the embattled bank.
Netflix Inc., which rallied 297 percent last year to lead gains in the S&P 500, slid 5.6 percent today as Morgan Stanley said the company faces more competition.
Almost three shares rose for every two that declined in the Stoxx 600. Trading volumes were 50 percent higher than the 30-day average for stocks in the European benchmark and 12 percent higher for the S&P 500, according to data compiled by Bloomberg.
The number of Germans out of work fell by a seasonally-adjusted 15,000 people, compared with a drop of 1,000 in a Bloomberg survey of economists.
Germany’s unemployment data “is stronger than anticipated and it clearly suggests that the moderation seen in the previous months was not the harbinger of a full-blown collapse of the labor market,” Annalisa Piazza, senior fixed-income strategist at Newedge Group in London, wrote in an e-mailed note. “The labor market clearly shows signs of improvement, confirming the resilience seen during the recession phase in the past few years.”
Vestas Wind Systems A/S rallied 6.1 percent for a second daily gain after the biggest wind turbine maker yesterday raised its 2013 free cash flow forecast. AP Moller-Maersk A/S jumped 3.5 percent after the owner of the world’s largest container-shipping company said it will sell a stake in its supermarket business.
Swedish Match AB dropped 5.5 percent after Citigroup Inc. recommended selling the maker of Longhorn snuff. Hugo Boss AG fell 2.3 percent after Societe Generale SA lowered its rating on the stock.
The MSCI Emerging Markets Index slipped 0.1 percent today and has declined more than 3 percent in 2014, following a 5 percent drop last year.
Wall Street’s biggest banks say the slump in emerging-market assets that left equities trailing advanced-nation shares by the most since 1998 last year will prove more than a fleeting selloff. Goldman Sachs Group Inc. recommends investors cut allocations in developing nations by a third, and JPMorgan Chase & Co. expects local-currency bonds to post 10 percent of their average returns since 2004 in the coming year.
Petrobras, Latin America’s biggest oil producer by market value, is selling euro notes maturing in four, seven, and 11 years as well as 20-year bonds in pounds, a person familiar with the sale said. Volkswagen AG, UniCredit SpA, BNP Paribas SA, and Lloyds Banking Group Plc also marketed bonds in Europe today, according to people with knowledge of the deals.
The yield on Ireland’s 10-year bond fell 7.5 basis points, or 0.75 percentage point, to 3.28 percent and reached 3.25 percent, the lowest level since January 2006. Ireland’s bond sale exceeded its minimum target. The debt was sold via banks to yield 3.543 percent, the National Treasury Management Agency in Dublin said, down from a rate of 4.15 percent at a similar sale in March.
“Strong demand for Irish bond sale suggests confidence returns to Ireland and perhaps other peripheral countries as well,” said Michael Leister, a senior fixed-income strategist at Commerzbank AG in London. “Strong secondary market performance also points to a similar picture. This will bode well for Portugal, which is likely to follow with a new bond this month.”
Italy’s two-year yield dropped below 1 percent for the first time since May 3. The rate on 10-year Italian securities slid seven basis points to 3.87 percent. Spain’s 10-year yield fell to as low as 3.79 percent.
The cost of insuring against losses on corporate bonds was little changed after reaching the lowest in four years. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies was at 68.67 basis points after reaching 68.2 basis points, the lowest since January 2010.
Ten-year U.S. Treasury notes rose, sending yields down two basis points to 2.94 percent, a second day of declines.
The dollar strengthened against 12 of 16 major currencies, gaining 1 percent versus Canada’s dollar and touching a one-month high against the Swiss franc. The yen lost 0.4 percent to 104.58 per dollar while the euro declined 0.1 percent against the greenback. Australia’s dollar slid 0.5 percent, falling for the first time in four days.
The U.S. trade gap narrowed 12.9 percent in November to $34.3 billion, smaller than economists projected and the least since October 2009, Commerce Department figures today showed. The Fed will publish tomorrow the record of its December meeting, where policy makers announced the first reduction in their record bond buying program. Data on jobless claims and payrolls is due later in the week.
The S&P GSCI gauge of 24 commodities climbed in its first advance in six days, as cotton and gasoline rose more than 1 percent and heating oil increased 0.8 percent. Oil was up 0.3 percent at $93.67 a barrel, snapping its longest slide since September amid the gain in U.S. equities.
Natural gas reversed a surge of as much as 2.9 percent to end the day down 0.7 percent at $4.299 per million British thermal units as forecasts for milder weather following today’s arctic blast in the U.S. Midwest and east stoked concern heating fuel demand will wane.
The natural gas-weighted heating degree days value is expected to be 46.5 today, according to Commodity Weather Group LLC in Bethesda, Maryland, beating this century’s previous high of 45.1 set Jan. 16, 2009. Freezing weather is also threatening livestock, and orange juice futures jumped the most in two months yesterday.
Gold and silver futures retreated the most in a week as the dollar rallied.