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.
Facebook Inc. advanced, rebounding from its lowest price since going public in May, as Chief Executive Officer Mark Zuckerberg said he won’t start selling his holdings in the social-networking company for at least a year.
Investors also awaited the U.S. government’s monthly employment report in two days. U.S. payrolls probably grew at a slower pace in August and unemployment exceeded 8 percent for a 43rd month, economists said before a Labor Department report on Sept. 7.
In the Stoxx 600, health, travel and insurance companies led gains, while oil companies and miners fell the most. BP Plc, the owner of the Macondo well that caused the worst U.S. oil spill, lost 2.9 percent after the Department of Justice reiterated it will pursue charges of gross negligence.
Norway’s krone weakened against all 16 major counterparts after a report showed Norwegian manufacturing unexpectedly contracted for a third straight month in August, adding to signs that the debt crisis is hurting exports in western Europe’s biggest oil producer.
Spanish two-year notes fell before the country sells as much as 3.5 billion euros ($4.4 billion) of securities due between 2014 and 2016 tomorrow. The Frankfurt-based ECB will refrain from setting a public cap on yields, according to three officials, who spoke on condition of anonymity.
Germany’s 10-year bunds dropped, sending yields up nine basis points to 1.48 percent, after the nation received bids for less than its maximum target at an auction.
U.S. companies from Cargill Inc. to Procter & Gamble Co. are selling bonds in Europe at the fastest pace since 2008 as they tap investor appetite for securities from borrowers outside the crisis-damaged euro region.
Euro-denominated offerings from American companies including Cincinnati-based P&G’s first deal in the currency since 2007 pushed sales to $5.7 billion last month, the busiest August in four years, data compiled by Bloomberg show. The surge brings this year’s total to $14.5 billion, the most for the period since 2010 and matching the amount for all of 2011.
The MSCI Emerging Markets Index fell 0.9 percent, headed for its lowest close since July 26. South Korea’s Kospi Index slid 1.7 percent as U.S. sales by Hyundai Motor Co. and Kia Motors Corp. missed some analysts’ estimates. The Hang Seng China Enterprises Index of mainland companies dropped 1.9 percent on a report China’s industrial output may slow. Russia’s Micex Index and India’s Sensex slipped at least 0.7 percent.