U.S. stocks retreat after weak jobs report

U.S. stocks fell, while Treasuries rose for the first time in four days after a weaker-than-forecast private jobs report. European equities slipped before a rate decision tomorrow from the region’s central bank, and industrial metals declined.

The Standard & Poor’s 500 Index lost 0.2 percent at 9:30 a.m in New York, and the Stoxx Europe 600 Index fell 0.2 percent. The yield on 10-year U.S. Treasuries retreated one basis point to 2.59 percent after four days of gains. Copper and aluminum declined at least 1 percent, while gold rose a second day. The dollar erased a gain versus the yen following the payrolls data.

The 179,000 increase in employment in the ADP Research Institute report was the smallest in four months and less than the median forecast in a survey of economists by Bloomberg. Investors are awaiting government payroll data on June 6 for signals on the pace of Federal Reserve stimulus cuts. Euro-area economic growth slowed in the first quarter, while services in the region expanded at the strongest pace in almost three years, reports today showed. European Central Bank policy makers meet tomorrow to decide on stimulus and interest rates.

“ADP was a little bit disappointing relative to expectations,” Walter Todd, who oversees about $980 million as chief investment officer at Greenwood Capital Associates LLC, said by phone. “But people are pretty much in wait-and-see mode ahead of the ECB and the payroll number. If we don’t get the action people are expecting out of the ECB tomorrow, that could be a pretty negative catalyst.”

Trade data

Separate U.S. data today showed the trade deficit ballooned in April to the widest in two years as Americans bought record amounts of consumer goods, business equipment and automobiles from abroad. The Fed releases its Beige Book review of regional economic conditions at 2 p.m. in Washington. The survey will give the Federal Open Market Committee anecdotal information about the economy before a June 17-18 meeting on monetary policy.

Data tomorrow will show initial jobless claims rose to 310,000 last week, according to a Bloomberg survey, while reports June 6 will show unemployment rose to 6.4 percent as nonfarm payrolls expanded by 215,000, economists estimate, after jumping 288,000 in April.

“The market certainly seems to be pricing in a strong set of data from the U.S. this week, which puts risk assets in an interesting position,” Stan Shamu, a markets strategist in Melbourne at IG Ltd., wrote in an e-mail to clients. “At the same time we have the European situation, where traders just continue to speculate what action the ECB will take this week.”

Bond moves

The advance in Treasuries ended a four-day selloff that pushed the 10-year yield 16 basis points higher. Even after that decline, the Bloomberg U.S. Treasury Bond Index gained 2.8 percent for 2014 through yesterday, headed for its best year since 2011.

German 10-year yields rose two basis points to 1.42 percent. The rate on similar-maturity Italian debt was little changed at 3 percent.

ECB President Mario Draghi has signaled he will act to prevent deflation in the 18-nation bloc. Of 50 economists surveyed by Bloomberg, 44 predict the ECB will become the first major central bank to take interest rates negative by cutting its deposit rate. All but two of 58 respondents said the benchmark rate would also be reduced.

Euro-area economic growth slowed to start the year, keeping pressure on the European Central Bank to act as soon as tomorrow to spur the fragile recovery and spark prices. Gross domestic product in the 18-nation currency bloc increased 0.2 percent in the first quarter, down from a revised 0.3 percent gain in the previous three months, the European Union’s statistics office in Luxembourg said today.

Valuation complacency

“There isn’t a lot of compelling value in many markets and there’s some complacency around valuations,” Tim Schroeders, a Melbourne-based fund manager who helps oversee $1 billion at Pengana Capital Ltd., said by phone. “It’s an interesting juncture for the Fed and risk isn’t being appropriately priced. The market is now not willing to be jawboned about the potential for rate rises.”

The trading volume of shares listed on the Stoxx Europe 600 index was 13 percent lower than the 30-day average, data compiled by Bloomberg show.

Bouygues SA lost 3 percent after Kepler Cheuvreux lowered its stock rating on the French construction and telecommunications company. Volkswagen AG slid 1.5 percent after Europe’s biggest carmaker sold 2 billion euros ($2.7 billion) of preferred shares to help pay for the takeover of Scania AB.

U.S. stocks

The S&P 500 slipped less than 0.1 percent yesterday, closing near a record high, after data showed faster-than- estimated growth in factory orders.

Central-bank stimulus has helped propel the S&P 500 higher by as much as 184 percent from its bear-market low in March 2009. The index has continued to climb to records even as the U.S. economy contracted for the first time in three years during the first quarter, amid optimism that a recovery is under way.

The MSCI Emerging Market Index slipped 0.3 percent, trimming its gain this year to 3 percent. It trades at 10.8 times projected 12-month earnings, data compiled by Bloomberg show.

The Shanghai Composite Index retreated for a fourth day, the longest losing streak in more than a month, sliding 0.7 percent. Hang Seng China Enterprises Index of mainland shares in Hong Kong dropped 0.5 percent, falling from the highest close since April 10.

Ukraine tension

Russia’s ruble dropped 0.3 percent against the dollar and the Micex Index of stocks rose 0.5 percent. The Ukrainian Equities Index dropped 0.4 percent. U.S. President Barack Obama meets Ukrainian President-elect Petro Poroshenko for the first time today as they seek ways to defuse a pro-Russian uprising that’s claimed almost 200 lives in the former Soviet state.

The dollar was little changed at 102.55 yen after earlier advancing to 102.65, the strongest in four weeks. The U.S. currency fluctuated at $1.36258 per euro.

Copper(COMEX:HG) dropped to $6,776.75 a metric ton and aluminum fell to $1,822.25 a ton. West Texas Intermediate oil(NYMEX:CLn14) climbed 0.6 percent to $103.31 a barrel after the American Petroleum Institute reported yesterday that U.S. stockpiles declined last week. The U.S. is the biggest oil consumer. U.K. electricity prices fell 2.8 percent to the lowest since April 2010 on plentiful supplies.

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