By Michael P. Regan and Allison Bennett
Jan. 12 (Bloomberg) -- The euro rose as European Central Bank
President Mario Draghi said he saw signs of stabilization in the region
and yields decreased at debt auctions in Spain and Italy. U.S. stocks
erased earlier losses, while Treasuries fell after a 30-year bond sale
drew lower-than-average demand.
The euro added 1 percent to $1.2831 at 1:22 p.m.
in New York and climbed versus 14 of 16 major peers. The Standard &
Poor’s 500 Index fluctuated near a five-month high above 1,292 after
slipping 0.5 percent earlier. Ten-year Treasury yields climbed two basis
points to 1.93 percent. Copper and oil rose, while corn and wheat
plunged on forecasts for larger stockpiles.
Spain sold 9.98 billion euros ($12.7 billion) of
notes, compared with a target of as much as 5 billion euros, while the
yield on Italy’s one-year bills fell to 2.735 percent. The auctions
triggered optimism that Europe’s debt crisis was not worsening. The
ECB’s Draghi said that while risks remain, the economy was showing signs
of stabilization as the central bank kept its benchmark interest rate
at 1 percent.
“Any good news for the euro zone could be a
trigger for traders to cover their short positions,” said Mamoru Arai,
foreign exchange manager at Mizuho Financial Group Inc. in New York.
“The market focused on the fairly positive comments about the European
economy from Draghi but I think they were well balanced. And there was
the good auction from Spain.”
Euro Strengthens
The euro rebounded from near a 16-month low
versus the dollar, also strengthening after industrial production in the
euro area declined by less than economists forecast. Spanish two-year
note yields fell below 3 percent for the first time since April 2011 and
the extra yield investors demand to hold Italian 10-year bonds versus
benchmark German bunds tightened 37 basis points.
“According to some recent survey indicators,
there are tentative signs of stabilization of economic activity at low
levels,” Draghi said at a press conference in Frankfurt. “Substantial
downside risks to the economic outlook for the euro area continue to
exist in an environment of high uncertainty.”
Among U.S. stocks, Chevron Corp. slid 2.2 percent
to lead energy shares to the biggest decline among 10 groups. Chevron
said fourth-quarter profit was “significantly below” the previous
period’s after maintenance at a California refinery and the sale of a
U.K. fuel plant hurt results.
Financial shares in the S&P 500 lost 0.6
percent as Bank of America Corp. and JPMorgan Chase & Co. retreated.
The group of 81 banks, insurers and investment firms has surged 22
percent from a two-year low on Oct. 3 amid increasing optimism on the
economy. The S&P 500 has rallied 17 percent over the same period.
Economic Data
Retailers slipped 0.3 percent as a group, with
Sears Holdings Corp. dropping 3.5 percent to lead declines. U.S. retail
sales rose 0.1 percent in December, less than the 0.3 percent increase
predicted in a Bloomberg survey of economists. Jobless claims climbed by
24,000 to 399,000 in the week ended Jan. 7, compared with a median
estimate of 375,000 in a Bloomberg survey.
European financial shares advanced. Royal Bank of
Scotland Group Plc jumped 5.6 percent as Britain’s biggest government-
owned lender said it will cut 4,800 jobs. ING Groep NV, the largest
Dutch financial-services company, advanced 3.7 percent after saying it
will explore other options for the planned disposal of its Asian
insurance and investment-management businesses.
European Retailers Plunge
A gauge of European retailers had the biggest
drop on a closing basis since October 2008. Tesco Plc plummeted 16
percent, the most since at least 1988, after the U.K.’s largest
supermarket chain reported Christmas sales that missed analyst estimates
and reined back profit expectations. Delhaize Group SA, the owner of
the U.S. Food Lion supermarkets, sank 11 percent in Brussels after also
reporting sales that trailed projections.
The MSCI Emerging Markets Index gained 0.7
percent, headed for the highest close since Dec. 7. Benchmark gauges in
Poland, Turkey and Hungary climbed at least 1.5 percent. The BSE India
Sensitive Index fell 0.9 percent as Infosys Ltd. cut its full- year
forecast for sales in dollar terms.
The Hungarian forint jumped 1.9 percent against
the U.S. dollar after the government sold more bonds than planned and
financing costs fell at an auction today.
Spanish Yields
The yield on Spain’s two-year note dropped for
the fourth straight day, sliding 13 basis points to 2.96 percent.
Italy’s 10-year yield sank 35 basis points to 6.63 percent. The yield on
the French 10-year bond dropped 12 basis points to 3.04 percent,
narrowing the difference in yield with bunds by 14 basis points to 120
basis points.
The yield on the existing 30-year U.S. Treasury bond increased two basis points to 2.98 percent.
The $13 billion in securities in today’s auction
were sold at a yield of 2.985 percent, compared with the record low of
2.925 percent reached at the December sale and lower than the average
forecast of 2.953 percent in a Bloomberg survey today of 21 primary
dealers. The offering’s bid-to-cover ratio, which gauges demand by
comparing total bids with the amount of securities offered, was 2.6,
versus an average of 2.7 in the previous 10 auctions.
Copper jumped 2.8 percent to lead gains among 12
of 24 commodities in the S&P GSCI index, which rose 0.2 percent.
China, the biggest buyer of the metal, reported inflation slowed to a
15-month low in December. Natural gas dropped as much as 3.7 percent to
$2.67 per million British thermal units, the lowest price since
September 2009, amid forecasts for milder weather.
Corn, soybean and wheat prices plunged the most
in three months after the U.S. forecast bigger inventories than analysts
expected, easing concern that shortages will inflate prices for food
and biofuels. Corn tumbled the 40-cent limit in Chicago, soybeans
plunged 3.1 percent and wheat slid 6.5 percent.
--With assistance from Stephen Kirkland in London, Lynn Thomasson in
Hong Kong and Charlie Zuza, Rita Nazareth and Susanne Walker in New
York. Editors: Michael P. Regan, Jeff Sutherland
To contact the reporters on this story: Michael P. Regan in New York
at mregan12@bloomberg.net;
Allison Bennett in New York at
abennett23@bloomberg.net
To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net
