European bonds extend losses as stocks drop; euro gains with oil
By Bloomberg
European bonds fell and the euro strengthened while stocks declined on worse-than-estimated earnings. Oil climbed, heading for its biggest monthly gain since 2009, as U.S. output slowed and stockpiles dropped.
The yield on 10-year German bonds jumped four basis points to 0.33 percent at 6:03 a.m. in New York. The euro jumped as much as 1.1 percent to $1.1249, its strongest level since Feb. 26, and the Bloomberg Dollar Spot Index is poised for its first monthly decline since June. The Stoxx Europe 600 Index fell 0.2 percent. Standard & Poor’s 500 Index futures slipped 0.3 percent. Greece’s bonds advanced, bucking most of the trend across the rest of Europe. Oil in New York climbed 0.5 percent.
Bonds slumped on Wednesday, erasing about $61 billion from the value of government securities in the euro area, after signs of inflation in Germany choked off demand at a debt auction. Euro-area consumer prices ended a four-month streak of declines, data showed on Thursday before reports on U.S. consumer spending and jobless claims. The Federal Reserve repeated yesterday its view that U.S. growth will rebound to a “moderate pace,” damping speculation that the central bank may delay its first rate increase since 2006 until next year.
“Just as expectations that U.S. rates will stay lower for longer have been undermining the dollar in recent weeks, higher rates in the euro zone are now having a supportive impact on the euro,” Jane Foley, a senior currency strategist at Rabobank International in London, said in a note. “For certain, the contrast that appeared to exist at the start of the year between a strongly growing U.S. economy and a euro zone bogged down by a deflationary threat has altered.”
Yields Climb
France’s 10-year bond yield increased four basis points to 0.60 percent, while Greece’s declined 21 basis points to 11.21 percent. Spain’s 10-year bond yield rose as much as 10 basis points to 1.57 percent, the highest since Feb. 19, before paring the increase to two basis points.
The euro advanced for a sixth consecutive day, the longest winning streak since 2013. It gained versus all of its 16 major peers apart from the Swedish krona, with a 0.5 percent advance against the yen to 133.12.
New Zealand’s dollar slumped after the central bank said it would cut interest rates if inflation pressures declined and called the currency’s strength while key export prices drop “unwelcome.” The kiwi fell 1 percent to 76.06 U.S. cents. The Stoxx 600 is heading for its first monthly drop of the year, with Germany’s DAX Index slumping 4.7 percent for the worst performance among developed markets. Greece’s ASE Index was one of the few gainers among western-European benchmark gauges, advancing 1.6 percent.
Results Disappoint
Nokia Oyj dropped 8.6 percent after posting first-quarter profitability for its networks unit that missed analyst estimates. Vallourec SA lost 15 percent after reporting profit that fell short of projections.
Air France-KLM Group slid 3.8 percent after posting a quarterly loss. Royal Bank of Scotland Group Plc retreated 2.6 percent after posting a larger quarterly loss than analysts estimated as it set aside more money for restructuring and currency-manipulation probes.
Holcim Ltd. gained 1.1 percent after reporting higher first-quarter profit. Lafarge SA, which is merging with the cement maker, gained 3.7 percent. Fresenius SE & Co. added 4.5 percent after raising its profit outlook for 2015.
S&P 500 E-mini futures expiring in June were fell after the index dropped for a second time in three days. It’s heading for a 1.9 percent monthly gain.
About 74 percent of the S&P 500 companies that have reported earnings this season have beaten analysts’ profit projections, while 47 percent topped sales estimates.
Emerging Markets
The MSCI Emerging Markets Index dropped 0.7 percent, trimming this month’s gain to 7.9 percent, the most since January 2012. A gauge of 20 developing nation currencies slipped 0.2 percent, leaving it 3.3 percent higher this month in the biggest gain since January 2012.
The Hang Seng China Enterprises Index of Hong Kong-listed Chinese companies slid 1.5 percent, set for a third day of losses, paring its best monthly advance since 2011 to 16 percent. The Shanghai Composite Index lost 0.8 percent, up 19 percent in April, the most this year.
China’s big five banks are at risk of their weakest full- year profit growth since at least 2004 after first-quarter results showed bad loans rising in a struggling economy. Industrial & Commercial Bank of China Ltd. fell to a one-week low on Thursday after reporting the biggest increase in bad loans since at least 2008.
Russia Rates
The ruble weakened 1.3 percent, trimming this month’s rally to 12 percent. The Bank of Russia will probably reduce its benchmark interest rate to 13 percent from 14 percent to keep a lid on the rally in the world’s best-performing, economists in a Bloomberg survey said before their decision due at about 1:30 p.m. in Moscow. Nine analysts predict a decrease of 150 basis points and five see a cut to 12 percent.
The Bloomberg Commodities Index rose 0.3 percent Thursday to a two-month high. The gauge has climbed 5 percent this month, with U.S. oil up 24 percent.
West Texas Intermediate crude advanced to $59.14 a barrel on Thursday, after jumping 2.7 percent to its highest settlement since Dec. 11 on Wednesday. A government report showed crude inventories at the biggest U.S. oil hub fell for the first time in 21 weeks, stoking optimism that the global supply glut will ease. WTI is on track for its biggest monthly advance since 2009.
Nickel rose 2.6 percent, the first increase in three days and headed for the largest monthly gain in a year after negotiations failed to halt a strike at the world’s second- largest ferro-nickel mine.
The London Metal Exchange Index advanced 3.9 percent this month through Wednesday, the most since December 2013.
--With assistance from Daisuke Sakai and Anna Kitanaka in Tokyo, Jonathan Burgos and Christopher Langner in Singapore, Emma O’Brien in Wellington and Cecile Vannucci, Paul Dobson and Andrew Reierson in London.