U.S. equities advance while yen drops with Treasuries before Fed

‘Outstanding Job’

Treasury 10-year note yields increased two basis points to 2.20% after climbing five basis points yesterday. The dollar was stronger against 13 of 16 major peers, while losing 0.1% to $1.3386 per dollar.

President Barack Obama said Fed Chairman Bernanke has stayed in his post “longer than he wanted,” one of the clearest signals the central bank chief will leave when his current term expires next year.

“Ben Bernanke’s done an outstanding job,” Obama said in an interview with Charlie Rose that aired yesterday, when asked about nominating him for another term subject to Senate approval. “He’s already stayed a lot longer than he wanted or he was supposed to.”

Investors cut bond holdings to a near two-year low this month and bought stocks as expectations the Fed may remove monetary stimulus bolstered growth forecasts, a Bank of America Corp. survey showed.

Buying Stocks

A net 50% of 190 global fund managers, who together oversee about $572 billion, said they now hold fewer bonds than are represented in asset-allocation benchmarks, while the proportion who are overweight on stocks rose to 48% from 41% as they bought U.S. and European shares. Emerging- market equity holdings slumped to the lowest level since December 2008.

“Investors’ sentiment has been surprisingly resilient in recent weeks despite the jump in volatility in financial markets,” New York-based Michael Hartnett, chief investment strategist at Bank of America’s Merrill Lynch unit, wrote in a note to investors today. “While our fund-flows data shows bond capitulation, the survey shows that there has been no capitulation in equities in the U.S. and Europe.”

European Movers

The Stoxx Europe 600 Index drifted between gains and losses, with trading volume about 17% below the average over the past 30 days.

Among stocks moving in Europe, Kabel Deutschland Holding AG rose 3.9% to a record as Liberty Global Plc made a preliminary takeover offer for Germany’s largest cable provider, pitting the John Malone-controlled company against Vodafone Group Plc. Danske Bank A/S slid 6% after the Financial Supervisory Authority said Denmark’s biggest lender had underestimated its risky assets.

Almost four stocks gained for every three that fell in the MSCI Emerging Markets Index, which lost 0.5%. Brazil’s Ibovespa lost 1%, extending its three-day retreat to 3.6%. The Hang Seng China Enterprises Index slipped 0.1% after official data showing Chinese home prices climbed in almost all cities in May stoked concern the increases will limit the scope for monetary stimulus.

Portugal’s 10-year bond yield dropped 15 basis points to 6.10% after European Union Economic and Monetary Affairs Commissioner Olli Rehn said the EU is looking at possible “precautionary arrangements” that might help the nation exit its aid program.

The yen retreated against all 16 major peers. It slid 1.3% to 127.97 per euro. Australia’s dollar fell 0.8% to 94.68 U.S. cents after the Reserve Bank indicated the currency may weaken further.

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