U.S. stock futures fell, signaling the market will extend a weekly decline, amid concern a political impasse over the federal budget will hurt the economy. Treasuries rose while the yen strengthened and energy led commodities lower.
Standard & Poor’s 500 Index futures (CME:SPZ13) fell 0.4% at 9:05 a.m. in New York while the rate on 10-year Treasury notes lost two basis points to 2.63%. The yen appreciated against all but one of its 16 major peers as Japan’s finance minister damped speculation the government will cut the corporate tax rate. The pound advanced 0.3% against the dollar as Bank of England Governor Mark Carney told a U.K. newspaper he does not support increasing asset purchases. Italian bonds and European shares slid following a debt auction.
U.S. House Speaker John Boehner’s plan to avert a shutdown by shifting to a debt-ceiling fight ran into opposition from some Republicans in another setback for efforts to keep the U.S. government operating after Sept. 30. Britain, France, the U.S., Russia and China agreed on a resolution requiring Syria to give up its chemical weapons, which the full Security Council of the United Nations will discuss today.
“People are just headline watching in terms of the debt ceiling,” said Nick Xanders, an equity strategist at BTIG Ltd. in London. Investors will “have to wait and see what happens with the votes in the next couple days and whether or not the lights go out in a couple of weeks,” he said.
The U.S. Senate plans to vote today on an emergency budget to prevent a shutdown of the federal government when the new financial year starts on Tuesday. The bill must then return to the House.
Among stocks moving in pre-market U.S. trading, J.C. Penney Co. slid 8.3% after the retailer began selling 84 million shares to raise cash. Nektar Therapeutics tumbled 20% after a study of the slow-release painkiller NKTR-181 failed to meet its goals. Nike Inc. surged 7.1% as fiscal first-quarter profit topped analysts’ estimates.
The U.S. Bloomberg Dollar Index slipped 0.2%. The pound rose 0.3% to $1.6095, after climbing to $1.6163 on Sept. 18, its highest level since Jan. 11.
“Given the recovery has strengthened and broadened, I don’t see a case for quantitative easing and I have not supported it,” Carney said, according to the Yorkshire Post.
Italian government bonds declined, extending a weekly loss, as the nation auctioned 6 billion euros ($8.1 billion) of debt maturing in 2018 and 2024. The yield on the country’s 10-year securities climbed five basis points to 4.38%. Italy’s Rome-based Treasury sold 3 billion euros of the 2024 bonds at an average yield of 4.5%, more than the 4.46% at a previous auction on Aug. 29.
Italy’s government bonds fell amid speculation that traders who deal directly with the Treasury had to hold on to most of the securities on offer at today’s auction as political tension deterred other buyers.
“The Italian auction was weak,” said Harvinder Sian, a senior fixed-income strategist at Royal Bank of Scotland Group Plc in London. “The issue is that it was a dealer-led affair and there wasn’t much real money buying. That -- allied to the political concerns -- means that sentiment toward Italian debt is poor.”
Yields on German 10-year bunds fell five basis points to 1.78%, their lowest level since Aug. 13.
Italy’s FTSE MIB Index dropped 0.9%. UniCredit SpA and Intesa Sanpaolo SpA, Italy’s two largest lenders, paced losses among lenders. Telecom Italia SpA retreated 2.4%.
The yen strengthened 0.6% to 98.44 per dollar.
Japanese Finance Minister Taro Aso told reporters today that reducing the corporate tax rate needs to be considered over a medium- to long-term perspective.
“The market is obviously looking at the comments by minister Aso,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London, in a telephone interview. “If you are concerned about shutdown risks then it probably does provide a little avenue of opportunity just to see the yen make some gains.”
West Texas Intermediate crude was little changed as it headed for a third weekly loss as the five permanent members of the UN Security Council agreed on a resolution to find and destroy Syria’s chemical weapons. The agreement does not specify how the UN will determine whether Bashar al-Assad’s regime has complied.
Gold rose 1% to $1,336.87 an ounce. Silver for immediate delivery gained 0.4% to $21.82 an ounce in London trading, paring its loss this month to 7.3%. Copper added 0.7% to $7,304 a metric ton on the London Metal Exchange.
Wheat slipped 0.1% from its highest price in more than two months. The crop has gained 4.8% this week and 3.6% this month. Soybeans rose 0.4% today.
The cost of insuring European corporate bonds rose this week, with the Markit iTraxx Crossover Index of credit-default swaps on 50 high-yield companies increasing six basis points to 400, the highest since Sept. 9.
The MSCI Emerging Markets Index slipped 0.3%, trimming the gain since June to 6.3%, its best quarterly performance in a year. Turkey’s Borsa Istanbul National 100 Index was little changed after five straight losses.
Stocks in Russia, which receives about half of its budget revenue from the oil and natural-gas industries, retreated 0.6% on the benchmark Micex Index.