The euro and Spanish 10-year debt advanced on the European Central Bank’s plan to buy bonds, while most U.S. stocks fell as FedEx Corp. cut its profit forecast and reports showed economies were slowing more than anticipated.
The euro appreciated 0.2 percent to $1.2595, near the highest level since July, and strengthened against 15 of 16 major peers at 4 p.m. in New York. Spanish 10-year yields decreased 16 basis points to 6.41 percent and Italian rates lost 15 basis points, while 10-year Treasury yields increased two basis points to 1.59 percent. The Standard & Poor’s 500 Index lost 0.1 percent and the Stoxx Europe 600 Index rose less than 0.1 percent. Coffee, wheat and natural gas led the S&P GSCI Index down 0.6 percent.
ECB President Mario Draghi’s bond-buying proposal involves unlimited purchases of government debt that will be sterilized to assuage concerns about printing money, two central bank officials briefed on the plan said. Sterilization involves draining money from other parts of the financial system to offset the new funds being pumped in. The ECB’s Governing Council will decide tomorrow on bond-buying plans.
“Unlimited and sterilized sounds good because it shows they’re willing to support these sovereigns,” said Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York. “The fact that it’s sterilized means that we shouldn’t have too bad an impact on the euro. Yields are coming lower. The market is reacting positively to that.”
The euro advanced the most against the Canadian, Norwegian and Australian dollars, climbing more than 0.6 percent against each. European stocks and the euro retreated earlier after London-based Markit Economics said euro-area services and manufacturing contracted more than initially estimated in August.
Ten-year Italian yields fell for a third straight day, dropping to 5.51 percent. Volatility on Italian government debt was the highest among developed markets today, according to measures of 10-year bonds, the spread between two- and 10-year securities and credit default swaps. The spread decreased to 309 basis points today from a record 338 points yesterday.
Among the 10 main industry groups in the S&P 500, utilities, energy and industrial companies were among the biggest declines, while raw-material, consumer-discretionary and telephone shares rose the most.
FedEx slid after its forecast marked the second time since June the company issued a profit estimate that trailed analysts’ projections. The shipping company is considered an economic bellwether because it moves worldwide goods ranging from documents to pharmaceuticals.