U.S. Stocks Drop as Yen, Gold Advance on Ukraine StandoffJeremy Herron and Callie Bost
The Standard & Poor’s 500 Index fell, giving the gauge its worst week since January, Treasuries were little changed and gold rose as investors sought haven assets after talks failed to resolve the Ukraine standoff before Sunday’s Crimea referendum.
The S&P 500 lost 0.3 percent at 4 p.m. in New York, extending a weekly slide to 2 percent. The yield on 10-year Treasuries traded at 2.65 percent, as the notes had the best week in two years. Gold advanced to the highest in six months. The yen climbed for a fifth day against the dollar. Copper futures rose on speculation that fiscal policy will be loosened to bolster the economy in China.
U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov failed to defuse the standoff over Ukraine in six hours of talks in London, as the Crimea peninsula prepared to vote on joining Russia. The U.S. and the European Union are threatening sanctions against Russia if it doesn’t back down from annexing Crimea. Ukraine’s Kiev-based cabinet says Russia has taken over the southern region and is massing troops on its border.
“Everyone is watching this Ukraine situation, not knowing what to make of it with the referendum scheduled on Sunday,” John Carey, a fund manager at Pioneer Investment Management Inc., a Boston-based firm that manages about $220 billion worldwide, said by phone. “People are realizing the market is OK if we don’t have a real setback internationally.”
The S&P 500’s 2 percent drop in the past five days was the largest weekly loss since January. The index is 0.4 percent lower this year after closing at an all-time high on March 7.
Russia “will respect the will of the Crimean peoples” when the peninsula votes in two days, Lavrov told a news conference after talks in London today with Kerry. “The Russian Federation has no plans to invade southeastern regions of Ukraine.”
Kerry repeated that Russia faces “consequences” if it does not change course and that there’s a better way for the government in Moscow to pursue its “legitimate interests” in Ukraine
Concern that the Crimea referendum could lead to an escalation and weaker-than-expected Chinese economic reports had wiped about $1.2 trillion from global stocks in the past four days.
The MSCI All-World Index dropped 0.6 percent to a one-month low. The gauge of developed and emerging stock markets has fallen six straight days, losing 2.7 percent in the longest streak since November 2012.
U.S. data today showed consumer confidence unexpectedly dropped in March to a four-month low. A separate report indicated producer prices declined in February.
The Federal Reserve is trying to determine how much recent data has been affected by weather. Chair Janet Yellen said last month the economy was strong enough to withstand measured reductions to monthly bond purchases. Policy makers meet March 18-19.
“There’s really not a catalyst here to move higher,” Jerry Braakman, chief investment officer of First American Trust in Santa Ana, California, said in a phone interview. His firm manages $1.1 billion. “There’s a lot of different stuff going on in the world and there’s been a little bit of profit-taking here as well.”
The MSCI Emerging Markets Index dropped 0.5 percent. The gauge has sunk 2.9 percent in the past five sessions for the biggest weekly slide since November. Russia’s Micex Index lost 0.9 percent to cap its worst week since May 2012.
Brazil’s Ibovespa approached a bear market, falling 1.7 percent to extend a plunge from its October peak past 20 percent.
The Stoxx Europe 600 Index fell 0.7 percent for a third day of losses that left the measure at a five-week low. All but one of 19 main groups retreated, with banks dropping 1.8 percent to pace losses.
The yield on the benchmark 10-year note touched 2.61 percent, the lowest level in 10 days, and posted the biggest weekly decline since June 2012. It fell through its 200-day moving average of 2.67 percent yesterday, a level some traders use as a gauge of where orders to buy and sell are set.
U.K. 10-year bonds advanced for a fourth day for their biggest weekly gain in two months. Germany’s 10-year yield was little changed at 1.55 percent. The yield earlier fell to 1.50 percent, the lowest since July 19.
‘Flight to Quality’
“We’ve seen core bond markets rallying, spreads rewidening and stock markets hammered, so it’s a pure flight to quality driven by fears of risk in the geopolitical situation,” Patrick Jacq, a fixed-income strategist at BNP Paribas SA in Paris, said in a telephone interview.
The yen has strengthened against all its major counterparts this week, appreciating 1.9 percent versus the greenback for its best gain since January.
The ruble led a decline in 24 major emerging-market currencies versus the yen.
Gold climbed 0.5 percent to settle at $1,379 an ounce in New York and silver advanced 1 percent to $21.413 an ounce.
In China, data yesterday added to signs that the world’s second-largest economy is slowing. Factory output rose in January and February from a year earlier by the least since the global financial crisis, while retail sales grew at the slowest rate for the period since 2004.
Bank of America Corp.’s Hong Kong-based economists yesterday cut their first-quarter growth forecast for China to 7.3 percent from 8 percent and their full-year estimate to 7.2 percent from 7.6 percent.
“Markets are nervous because we’ve got two catalysts,” Andreas Lipkow, a senior market strategist at Kliegel & Hafner AG in Berlin, said by telephone. “First, we have the Crimean crisis and people are going to be watching the referendum. Second, there are now signs China’s recovery will be more difficult than previously thought. It’s hard to figure out what will happen next, so investors are in a risk-off mode and have become defensive.”
Copper for delivery in three months gained 0.9 percent to settle at $2.9505 a pound in New York. On March 12, the price touched $2.908, the lowest for a most-active contract since July 6, 2010.
China may boost contingent spending on low-income housing, environmental protection and information technology, Goldman Sachs Investment Strategy Group said today in a report.
“With the recent data that we’ve seen in the past few days, there’s expectations that there will be some kind of measure that China will implement to stimulate growth,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview.
West Texas Intermediate crude rose 0.7 percent to $98.89 after the International Energy Agency raised its demand forecast. Oil earlier rose as much as 86 cents to $99.06 a barrel in New York, trimming its biggest weekly decline since early January.