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S&P 500 Futures Rise With Stocks as Yen Weakens; Bonds Advance

June 12, 2013

June 12 (Bloomberg) -- Standard & Poor’s 500 Index futures rose, indicating the gauge will snap a two-day decline, European shares rebounded and the yen weakened after gaining the most versus the dollar in three years. Treasuries erased losses before a debt sale while Spanish and Italian bonds advanced.

S&P 500 futures added 0.5 percent at 7:25 a.m. in New York. The Stoxx Europe 600 Index advanced 0.4 percent after touching a seven-week low. The ASE slipped 0.9 percent in Athens as Greece became the first developed nation to be cut to emerging-market status by MSCI Inc. Japan’s currency slid at least 0.3 percent against its 16 major peers. The 10-year Treasury yield fell one basis point to 2.18 percent. Spanish and Italian bonds ended two days of losses. Nickel slumped to the lowest since July 2009.

More than $2.5 trillion has been erased from the value of global equities since Federal Reserve Chairman Ben S. Bernanke said May 22 that the Fed "could" scale back stimulus efforts if the employment outlook shows "sustainable improvement." The yen has appreciated more than 7 percent after sliding to a 4 ½-year low on May 22. A report today showed euro-area industrial output unexpectedly increased in April.

"There’s lots of confusion around the world at present about what central bank policy means for the outlook of the global economy, earnings and valuations," Matthew Sherwood, the Sydney-based head of investment market research at Perpetual Ltd., which manages about $25 billion, said by e-mail. "The Fed is likely to continue to be ambiguous about its next step, probably because it’s not sure. This will see markets continue to be volatile."

 

Currency Volatility

 

JPMorgan Chase & Co.’s Global FX Volatility Index was at 10.55 percent, after reaching 10.59 percent yesterday, the highest since June 19, 2012.

The yen weakened 0.6 percent to 96.63 per dollar and fell 0.4 percent to 128.53 per euro. Europe’s 17-nation shared currency slipped 0.2 percent to $1.3282. The Aussie added 1.2 percent to 95.37 U.S. cents as a report showed consumer confidence in the nation rebounded this month.

The U.S. sells $21 billion of 10-year notes today and $13 billion of 30-year bonds tomorrow. A three-year auction yesterday drew the lowest bidding since 2010. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said he cut his Treasury holdings last month.

The yield on Spain’s 10-year bonds fell 12 basis points lower to 4.54 percent. The rate on similar-maturity Italian debt slipped nine basis points to 4.28 percent.

 

Default Risk

 

The cost of insuring corporate bonds with credit-default swaps dropped, with the Markit iTraxx Europe Index of contracts linked to 125 investment-grade companies decreasing 1.3 basis points to 110.2, the first decline in three days.

Two shares advanced for every one that declined in the Stoxx 600, which earlier declined as much as 0.2 percent. Kabel Deutschland Holding AG jumped 8.6 percent after Vodafone Group Plc confirmed that it approached the German company about a takeover. Severn Trent Plc tumbled 8.3 percent, the most in almost four years, after a group of investors dropped their bid for the water utility.

MSCI, whose equity gauges are tracked by investors with about $7 trillion in assets, downgraded Greece to an emerging market after the ASE plunged 83 percent since 2007. The New York-based index provider raised Qatar and the United Arab Emirates to emerging markets, while Morocco was cut to a frontier market. Shares in Qatar, Dubai and Abu Dhabi climbed.

 

Emerging Markets

 

The MSCI Emerging Markets Index rose 0.4 percent, snapping a five-day decline. The Jakarta Composite Index jumped 1.9 percent, halting a four-day slump and Indonesian rupiah forwards rose after the central bank increased the rate it pays lenders on overnight deposits.

The Borsa Istanbul Stock Exchange 100 Index rebounded from a six-month low, climbing 1.9 percent and the lira strengthened for a second day. Central bank Governor Erdem Basci said the bank would intervene in the market to tame currency volatility and police drove protesters out of Taksim Square in Istanbul after a night of violence. The yield on two-year notes fell from the highest since November.

A measure of default risk on emerging-market debt in central and eastern Europe, the Middle East and Africa fell from a record. The Markit iTraxx CEEMEA Corporate Index dropped 4.3 basis points to 280.

Nickel declined for a sixth consecutive day, the longest streak since Dec. 31, as stockpiles in warehouses monitored by the London Metal Exchange jumped to a record. Wheat dropped 0.7 percent before the U.S. Department of Agriculture’s monthly crop report due at noon in Washington.

 

--With assistance from Adam Haigh in Sydney, Claudia Carpenter, Paul Dobson, Abigail Moses, Andrew Rummer, Shelley Smith in London. Editors: Stephen Kirkland, Justin Carrigan

 

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

 

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net

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