Dow reaches four-year high on manufacturing as Treasuries drop

‘Luke Warm’ Recovery

“This is a luke-warm, milquetoast type of recovery,” Carl Riccadonna, a Deutsche Bank AG senior U.S. economist, told Bloomberg Television. “So there are going to be fits and starts along the way. But we’re expanding and we’re at trend growth as of last quarter.”

Thirty-year Treasury bonds also retreated today, sending their yield up five basis points to 3.16%. Rates on two- year notes were little changed at 0.27%.

For the first time since 2008, bonds were the only major investment class to provide positive returns in April amid renewed concern the global economy is slowing and as widening deficits in Europe threaten contagion.

Fixed-income assets -- from global government debt to junk bonds -- gained 0.7% last month including reinvested interest, according to Bank of America Merrill Lynch index data. The MSCI All-Country World Index of stocks lost 1.1% including dividends while the S&P GSCI Total Return Index of metals, fuels and agricultural products fell 0.5%. The U.S. Dollar Index dropped 0.3%.

Australia Rate Cut

The Australian dollar weakened against all 16 of its most- traded peers today, falling 0.4% versus the yen. The dollar reversed earlier losses versus the euro after the ISM report, strengthening 0.1% to trade at $1.3226 per euro.

The Reserve Bank of Australia lowered its key rate to 3.75% from 4.25%, the biggest reduction in three years. RBA Governor Glenn Stevens and his board cut the overnight cash rate target to a two-year low of 3.75% from 4.25%, the deepest reduction in three years.

The half-point cut was “judged to be necessary in order to deliver the appropriate level of borrowing rates,” Stevens said in a statement today. In the next year or two, “inflation will probably be lower than earlier expected” and within the RBA’s target range of 2% to 3%, he said. The cut came after manufacturing data in Australia and the U.K. weakened and rose less than estimated in China.

‘Nice Surprise’

“It’s a nice surprise and it was the right move,” Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages almost $100 billion, said about the RBA decision. “Given the weakness that we’ve seen across the board in manufacturing and retail, a quarter point cut wasn’t going to be enough. They have done the right thing.”

The FTSE 100 advanced for the fifth time in six days as two shares gained for every one that dropped. Lloyds Banking Group Plc rose 8.3% as Britain’s biggest mortgage lender said first-quarter profit more than doubled, beating analyst estimates. BP Plc, Europe’s second-biggest oil company, dropped 0.8% after profit declined. Man Group Plc slid 5.5% as the hedge-fund manager reported $1 billion in client outflows in the first quarter.

Missing Estimates

Japan’s Nikkei 225 dropped 1.8% to a 10-week low as Sharp Corp., the nation’s largest producer of liquid-crystal displays, plunged 9.3% after forecasting a wider-than- estimated loss. Tokyo Electron Ltd. tumbled 8.3% after the chip-equipment maker said profit fell more than expected.

Natural gas rallied 3.8%, extending gains after rising 4.5% yesterday, as cooler weather forecast for next week may ease a glut and the Energy Department said production in the lower 48 states fell 0.6% in February. Copper added 0.3% to $3.8410 a pound and oil climbed 1.2% to $106.13 a barrel.

Most Asian and European markets were closed for public holidays. China’s Purchasing Managers’Index rose to 53.3 from 53.1 in March, the statistics bureau and logistics federation said today. That’s the highest reading in a year and compares with the 53.6 median forecast in a Bloomberg News survey of 27 economists.

Bloomberg News

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