In the U.S.: Stocks Retreat on Slower U.S. Economic Growth; Spanish Bond Yields Surge

22 November 2011


In the wee morning hours, another title read ‘Stocks, S&P 500 Futures Rise on U.S. Ratings’. It’s a crazy world we live in!

Stocks fell, dragging the Standard & Poor’s 500 Index to a fifth straight loss, as the U.S. economy grew less than estimated and Spain’s three-month borrowing costs more than doubled at an auction. The dollar rose against most peers, while Treasuries were little changed.

The S&P 500 lost 0.2 percent at 9:30 a.m. in New York. The StoxxEurope 600 Index slipped 0.2 percent, after earlier climbing 1 percent. Spain’s two-year note yield rose 18 basis points to 5.77 percent, withFrance’s yield six basis points higher. Copper snapped a three-day decline and gold rebounded from a one-month low to help lead commodities higher.

Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected by economists and down from a 2.5 percent prior estimate, Commerce Department data showed.Spain sold three-month bills at a yield of 5.11 percent, more than double the 2.292 percent yield the last time the debt was offered on Oct. 25.

“We haven’t any new bazooka to pull out of the bag,” Michael Meister, finance spokesman for German Chancellor Angela Merkel’s Christian Democratic party, said.

About $3.3 trillion has been wiped off global equity values this month amid concern Europe’s credit crisis is worsening. Stocks (MXWD)gained earlier after S&P and Moody’s Investors Service kept the U.S. credit rating unchanged following Congress’s failure to reach an agreement to cut the deficit, setting the stage for $1.2 trillion in automatic spending cuts.

The S&P 500 slid to its lowest level since Oct. 7 yesterday. Hewlett-Packard Co. fell in pre-market trading after forecasting first-quarter profit and fiscal 2012 earnings that missed analysts’ estimates. (HPQ)

Three shares declined for every two that gained in the Stoxx 600. Thomas Cook Group Plc tumbled 72 percent as Europe’s second-largest tour operator said it held talks with banks on financing.

The yield on Spain’s 10-year bond rose eight basis points to 6.63 percent. The government also offered six-month bills at an average yield of 5.227 percent, compared with 3.302 percent last month.

The extra yield investors demand to hold Belgian 10-year bonds instead of benchmark German bunds increased 27 basis points to 317 points after Belgium’s coalition talks were suspended as Elio Di Rupo offered to resign from leading the negotiations.

Money Markets Ease

The Greek two-year note yield climbed 60 basis points to 112.66 percent.

The cost for European banks to fund in the U.S. currency fell after increasing for six straight days, declining from the highest level since December 2008. The three-month cross- currency basis swap, the rate banks pay to convert euro payments into dollars, was 134 basis points below the euro interbank offered rate, from 139 yesterday.

The five-year Treasury yield was little changed at 0.90 percent before the government sells $35 billion of the securities, the second of three auctions this week totaling $99 billion. A two-year note sale attracted the highest demand ever yesterday as investors sought the safest assets.

The euro appreciated 0.1 percent to $1.3503, after climbing as much as 0.6 percent. The Swiss franc strengthened 0.3 percent against the dollar and 0.2 percent versus the euro, rising for the third consecutive day. The yen depreciated against most of its most actively traded peers monitored by Bloomberg, and the Dollar Index was little changed at 78.289.

Egypt Tumbles

The MSCI Emerging Markets Index (MXEF) slipped 0.1 percent, erasing earlier gains. Brazil’s Bovespa index lost 0.7 percent, and Turkey’s ISE National 100 Index dropped 2.1 percent. Egypt’s EGX 100 Index declined 5.5 percent, the most in almost two months, after the government offered to quit and fighting between protesters and security forces continued.

Copper rose 1 percent in London, following a three-day, 5.4 percent slump. Tin added 1.5 percent and zinc gained 1 percent. Gold futures rose 1 percent to $1,694.80 an ounce after falling 2.7 percent yesterday, the most in almost two months. Oil rallied 0.9 percent to $97.82 a barrel in New York, the first increase in four days.

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