By Michael Shanahan and Lu Wang - Apr 4, 2012 9:45 PM GMT+0700
Stocks and commodities slid after Spain sold less debt than targeted at an auction and the Federal Reserve signaled it may refrain from more monetary stimulus. The euro weakened and Spanish five-year yields climbed to an almost three-month high.
The Standard & Poor’s 500 Index lost 1.1 percent, its second-biggest drop of the year, and the Stoxx Europe 600 Index declined 1.8 percent as of 10:45 a.m. in New York. The euro depreciated to a three-week low against the yen, while 10-year Treasury yields fell six basis points to 2.24 percent. Spanish five-year yields surged 19 basis points to 4.45 percent, the highest since January. The S&P GSCI gauge of commodities retreated 1.3 percent as silver and gold led losses and oil extended losses after U.S. supplies grew .
Traders on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg
April 4 (Bloomberg) -- Vasu Menon, vice president for wealth management at Oversea-Chinese Banking Corp., talks about the minutes of the Federal Reserve's last meeting and the outlook for Asia equities. Menon speaks from Singapore with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
April 4 (Bloomberg) -- George Boubouras, head of investment strategy at UBS AG's Australian wealth-management unit, talks about global financial markets and economies following the release of U.S. Federal Reserve minutes. The Fed is holding off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a rate slower than its 2 percent target. Boubouras speaks from Melbourne with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
April 4 (Bloomberg) -- Ronald Wan, a Hong Kong-based managing director at China Merchants Securities Co., talks about the nation's opening of its capital markets, the country's banking industry and his investment strategy. Wan speaks with Susan Li, Rishaad Salamat, Mia Saini and Zeb Eckert on Bloomberg Television's "Asia Edge." (Source: Bloomberg)
Passersby stand in front of the Australia Securities Exchange (ASX Ltd.) electronic stock board in Melbourne, Australia. Photographer: Luis Enrique Ascui/Bloomberg
Spain sold 2.59 billion euros ($3.41 billion) of bonds due between January 2015 and October 2020, compared with a planned maximum of 3.5 billion euros. The Fed will refrain from increasing monetary accommodation unless the economic expansion falters or prices rise at a rate slower than its 2 percent target, according to minutes of its March 13 policy meeting released yesterday.
“The perception is that you’re taking away the safety net of excess liquidity that lifted asset prices,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “Given the exceptionally good run we’ve had year- to-date, people are reassessing their risk-reward scenarios.”
‘Downside Risks’
European Central Bank officials meeting in Frankfurt today kept the benchmark interest rate at a record low of 1 percent, as predicted by all 57 economists in a Bloomberg News survey. ECB President Mario Draghi said while a “moderate” economic recovery is expected this year, the outlook is subject to “downside risks” as the debt crisis dampens momentum. Draghi also said any talk of an exit strategy from stimulus measures is premature for now.
The S&P 500 retreated for a second day even after an industry report showed companies in the U.S. expanded payrolls in March. Employment increased by 209,000 for the month after a revised 230,000 gain in February, figures from ADP Employer Services showed today. The median estimate in the Bloomberg News survey called for a 206,000 increase.
Service industries in the U.S. expanded less than forecast in March as orders grew at the slowest pace in three months. The Institute for Supply Management’s non-manufacturing index dropped to 56 from a one-year high of 57.3 in February. Readings above 50 signal expansion, and economists surveyed by Bloomberg News projected 56.8 for the gauge, according to the median estimate.
SanDisk Tumbles
SanDisk Corp. slid 9 percent after the biggest maker of flash-memory cards cut its forecast for first-quarter sales and profitability, citing weaker-than-expected pricing and demand for components that store data in mobile phones.
General Electric Co. fell 1.5 percent after its debt rating was cut by Moody’s Investors Service because of “heightened risk” from its finance unit, whose own grade was cut below the parent company’s for the first time in two decades.
U.S. equities fell yesterday as the Fed minutes showed less urgency to add stimulus. Policy makers last month affirmed the plan, first announced in January, to hold interest rates near zero through late 2014 on concern the economy may fail to grow fast enough to continue bringing down unemployment.
‘Welcome Change’
“There’s no justification for the Fed to ease monetary policy further,” Vasu Menon, vice president for wealth management at Oversea-Chinese Banking Corp., said in a Bloomberg Television interview from Singapore. “The market has run up at a very heavy pace, so I think a breather or a correction would be a welcome change for now.”
Almost 50 shares fell for each that advanced in the Stoxx 600. Automakers led declines as U.S. sales of cars and light trucks in March missed the average estimate in a Bloomberg survey of analysts. PSA Peugeot Citroen (UG) slid 6.3 percent and Volkswagen AG fell 2.9 percent. Petropavlovsk Plc, a producer of gold in Russia, sank 6.6 percent as the precious metal retreated for a second day.
Germany’s DAX Index slumped 2.6 percent and Sweden’s OMX Stockholm 30 Index tumbled 3.6 percent to lead losses among European national benchmark indexes. German factory orders increased in February less than economists had forecast. Orders, adjusted for seasonal swings and inflation, increased 0.3 percent from January, the Economy Ministry in Berlin said. Economists had predicted a gain of 1.5 percent, according to the median of 35 estimates in a Bloomberg News survey.
The cost of insuring sovereign debt rose, with the Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments climbing 5.4 basis points to 270. Swaps on Spain jumped 21 basis points to 460, the highest since November, according to CMA.
Brent Crude
Oil tumbled 1.8 percent to $102.19 a barrel, extending losses after the U.S. Energy Department said stockpiles rose 9.01 barrels to 362.4 million. Copper dropped 2.4 percent to $3.8255 a pound.
Markets in China and Taiwan were shut for holidays. The MSCI Emerging Markets Index (MXEF) fell 1.6 percent, halting a three- day, 2.2 percent climb. The Micex Index (MICEX) fell 2.6 percent in Moscow and the FTSE/JSE Africa All Shares Index (JALSH) slid 1.9 percent in Johannesburg as the prices of oil and metals fell. Turkey’s ISE National 100 Index (XU100) retreated 1.3 percent. South Korea’s Kospi Index (HSCEI) slid 1.5 percent, the biggest loss since Dec. 19.
China Investment
China accelerated the opening of its capital markets by more than doubling the amount foreigners can invest in stocks, bonds and bank deposits. The China Securities Regulatory Commission increased quotas for qualified investors to $80 billion from $30 billion, according to a statement yesterday. Offshore investors will also be allowed to pump an extra 50 billion yuan ($7.95 billion) of local currency into the country, up from 20 billion yuan.
Australia’s dollar sank to an 11-week low as data showed the nation had an unexpected trade deficit. The so-called Aussie slid 0.7 percent to $1.0264 and touched $1.0244 after Australia posted a trade deficit for a second month in February, completing the first consecutive shortfalls in two years.
To contact the reporters on this story: Michael Shanahan in London at mshanahan3@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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