U.S. stocks extended the worst monthly drop since May 2012 as investors weighed a smaller-than- forecast increase in consumer spending and prospects for military action against Syria. European shares dropped and Portuguese bond yields surged amid concern the nation will struggle to meet its deficit target.
The Standard & Poor’s 500 Index lost 0.2% to 1,634.57 at 10:14 a.m. in New York to extend its loss for August to more than 3%. The Stoxx Europe 600 Index retreated 0.9% and the MSCI Emerging Markets Index gained 0.7%. Portuguese yields jumped to a five-week high. Ten-year Treasury yields were little changed at 2.76%, with the benchmark note poised for a fourth month of losses. West Texas Intermediate oil slipped 0.4% to $108.35 a barrel as silver and gold retreated. The yen strengthened against most of its 16 major peers.
Concern that conflict with Syria will disrupt Middle East oil supplies eased as U.K. Prime Minister David Cameron failed to gain parliamentary backing for military action. U.S. consumer spending increased for a third month in July, a Commerce Department report showed. In Portugal, the Constitutional Court said late yesterday that it opposed a plan to end labor contracts for some state employees.
“If you are a creditor of Portugal, that news doesn’t sound very good,” said Luca Jellinek, head of European rate strategy at Credit Agricole Corporate & Investment Bank in London. “It’s the third time the court turns down budget-saving measures. But I don’t think ultimately it’s going to derail what’s going on in Portugal. It just makes it less efficient and harder to slim down the state.”
Commodities outperformed stocks and bonds this month. The S&P GSCI gauge of 24 raw materials rose 3.4% in August, while the MSCI All-Country World Index of equities declined 2% and the BofA Merrill Lynch Global Broad Market Index of debt fell 0.4%.
The S&P GSCI dropped 0.5% as silver declined to $23.46 an ounce. Gold retreated to $1,394.48 an ounce, narrowing this month’s gain to 5.2%.
Among U.S. stocks moving today, Salesforce.com Inc jumped in early trading as the provider of customer-management software announced sales and profit forecasts that beat analysts’ projections. Krispy Kreme Doughnuts Inc. tumbled after reporting second-quarter earnings that trailed analysts’ estimates as costs increased.
European oil producers led losses in the Stoxx 600 as BP Plc, Royal Dutch Shell Plc and Total SA lost at least 0.9%. Royal KPN NV slid 6.4% after America Movil SAB said it may withdraw its bid for the Dutch phone company. Late yesterday, KPN’s foundation said it had exercised an option to buy preferred shares, giving it almost 50% of issued and voting stock in the telecommunications operator.
L’Oreal SA advanced 4.9%, its biggest gain in six months, after the world’s largest cosmetics maker left open the option to buy back Nestle SA’s 29% stake in the company. L’Oreal Chief Executive Officer Jean-Paul Agon told French newspaper Les Echos that “we have the resources permitting us to envisage all opportunities.”
The European Commission’s index of executive and consumer sentiment in the 17-nation euro area climbed to 95.2 in August, from 92.5 in July. That exceeded the median economist forecast in a Bloomberg survey.
Treasuries headed for their longest stretch of monthly declines in more than two years amid speculation the Federal Reserve will reduce the pace of its monthly bond purchases. The yield on the benchmark 10-year note has risen 18 basis points since July 31, according to Bloomberg Bond Trader data.
The yen strengthened 0.2% to 98.19 per dollar and 0.4% to 129.75 per euro. Norway’s krone slid versus 15 of its 16 major counterparts.
Portuguese bonds declined after a court found that a proposed plan to end labor contracts for some state workers was unconstitutional, raising concern the government will struggle to meet its deficit targets. The yield on 10-year Portuguese securities climbed 19 basis points 6.77%, its highest level since July 22.
European corporate bonds lost 0.2% in August, the fourth month of declines in a year that has so far generated the worst return since 2008. Investment-grade debt in euros has returned 0.8% this year compared with 9% in the same period of 2012, Bank of America Merrill Lynch index data show.
The cost of insuring against losses on company debt rose today, with the Markit iTraxx Europe index of credit-default swaps on 125 high-grade borrowers increasing 1.4 basis points to 106.2.
The MSCI Emerging Markets Index climbed 0.9%, extending its two-day gain to more than 2%, the biggest in more than a month. The gauge has still fallen 2% in August.
The SET Index in Thailand increased 0.1%, paring its retreat this month to 9.1%.
The Indian rupee strengthened 1.3% to 65.71 per dollar after earlier weakening as much as 1.3%. Economic growth probably fell to 4.7% in the second quarter from 5.4% a year earlier, according to the median estimate of 44 economists in a Bloomberg survey. Indian Prime Minister Manmohan Singh said the government’s push to bolster growth will support the rupee, which plunged to a record low earlier this week.