The Dollar Index rose to the highest level in more than nine months as improving U.S. growth spurred speculation policy makers may curb stimulus. Commodities fell, while European stocks advanced and the pound rallied.
The gauge used to track the U.S. currency against six of the country’s trade partners climbed 0.3 percent to 83.816 at 6:20 a.m. in New York. The euro weakened 0.3 percent to $1.2882 after data showed the region’s economy shrank more than forecast in the first quarter, while the pound strengthened after Bank of England Governor Mervyn King said a recovery is “in sight.” The Stoxx Europe 600 Index rose 0.4 percent, while Standard & Poor’s 500 Index futures slid less than 0.1 percent. Silver and gold led the S&P GSCI index of 24commodities 0.5 percent lower.
A report today will probably show manufacturing in the New York region picked up this month after data earlier this week indicated U.S. retail sales unexpectedly advanced in April. Bank of America Corp. and JPMorgan Chase & Co. this week cut 2013 growth estimates for the world’s second-biggest economy to 7.6 percent after April industrial production and fixed-asset investment trailed forecasts.
“Dollar bulls will be watching for the Empire Manufacturing data and anything that provides a clue as to where the U.S. economy will be going,” said Neil Jones, the head of hedge-fund sales at Bank Ltd. in London. “Expectations are firming for U.S. employment to move to the 6.5 percent level and signal the end of QE. Funds are moving away from the euro given further evidence of a major slowdown.”
Extending Recession
Gross domestic product in the euro area fell 0.2 percent after a 0.6 percent decline in the previous three months, the European Union’s statistics office said today. The median of 39 estimates in a Bloomberg News survey was for a 0.1 percent contraction.
The dollar advanced against all but three of its 16 major counterparts. It appreciated 0.3 percent against the Swiss franc to the highest since August. U.S. Treasuries rose, pushing the 10-year yield two basis points lower to 1.95 percent.
The pound strengthened against its main counterparts, climbing 0.3 percent versus the euro and 0.2 percent to $1.5238. BOE Governor Mervyn King presented his final forecasts with an improved outlook for U.K. economic growth.
Italy’s 30-year bond yield added one basis point to 4.80 percent after touching 4.89 percent, the highest since April 26.
The cost of insuring European corporate bonds rose to a two-week high, with the Markit iTraxx Europe Index of 125 investment-grade companies adding two basis points to 98 basis points.
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Greece Upgrade
Greece’s 10-year government bonds advanced, pushing the yield below 9 percent for the first time since October 2010, after Fitch Ratings yesterday raised its grade one level to B-, citing “clear progress” on rebalancing the economy. The yield fell 96 basis points to 8.36 percent.
Three shares advanced for every two that dropped in the Stoxx 600, which traded near the highest level since June 2008. Commerzbank AG surged 15 percent, rebounding from a record low, on the first day of a rights offer to raise about 2.5 billion euros ($3.3 billion). EasyJet Plc rallied 5.6 percent as Europe’s second-largest discount airline reported a narrower first-half loss. London Stock Exchange Group Plc rose 3.6 percent as profit topped estimates.
The decline in S&P 500 futures indicated the U.S. gauge will retreat from a record. A report at 8:30 a.m. local time may show manufacturing in the New York region expanded for a fourth month in May, with the Federal Reserve Bank of New York’s general economic index rising to 4 this month from 3.1 in April, according to the median of 52 estimates in a Bloomberg survey of economists. A separate release may show U.S. factory output declined in April.
Emerging Markets
The MSCI Emerging Markets Index slipped less than 0.1 percent even as three stocks rose for every two that declined. Russia’s Micex index slid 0.6 percent while the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 0.5 percent. India’s Sensex jumped 2.3 percent, the most in a month, after Reserve Bank of India Governor Duvvuri Subbarao said yesterday that he would “take note” of softening inflation at next month’s policy review.
Chinese corporate borrowing will probably exceed that of U.S. companies within the next two years, according to S&P. Non- financial institutions from the world’s second-largest economy will need $18 trillion of debt during the five years ending 2017, the ratings company said in a report yesterday. That’s 34 percent of the $53 trillion in bonds and loans S&P estimates will be sought globally and compares with $13 trillion forecast for U.S. companies.
Gold fell for a fifth day, the longest slump since February, losing 1 percent to $1,411.34 an ounce, and silver dropped 1.9 percent. Copper declined 1.1 percent and nickel retreated 1.2 percent. China is the biggest buyer of industrial metals. West Texas Intermediate oil was down 0.7 percent to $93.52 a barrel, the fifth consecutive decline and the longest streak since Dec. 10.
