Treasuries, Dollar, Yen Gain; U.S. Index Futures Trim Losses
Oct. 18 (Bloomberg) -- Treasuries rebounded from the biggest weekly drop this year amid speculation the Federal Reserve will buy more securities, while the dollar rallied as currency traders bet the purchases will be gradual. U.S. futures trimmed losses as Citigroup Inc.'s earnings topped estimates.
The advance in Treasuries sent the 10-year yield down three basis points to 2.53 percent at 9:11 a.m. in New York. The Dollar Index climbed as much as 0.8 percent, the biggest gain since Sept. 15, while the yen appreciated against all 16 of its most-traded counterparts. Copper fell for the first time in a week in London. Standard & Poor's 500 Index futures lost 0.2 percent after tumbling 0.9 percent earlier. The Stoxx Europe 600 Index rose 0.2 percent.
Federal Reserve Bank of Chicago President Charles Evans said Oct. 16 that the U.S. is in a "liquidity trap" and needs "much more" monetary accommodation. Fed Chairman Ben S. Bernanke signaled last week more so-called quantitative easing is likely. International Business Machines Corp. and Apple Inc. are due to report earnings today.
"There is little more benefit to be gained at this juncture talking up the prospects of more quantitative easing," Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney, wrote in a report today. "Risk assets are going to struggle to push forward from here."
Financial-services companies led gains in Europe's Stoxx 600. BlueBay Asset Management Plc, the London based manager of fixed-income funds, jumped 30 percent after agreeing to be bought by Royal Bank of Canada. Royal Philips Electronics NV, the world's largest lighting company, slid 4.3 percent after saying it was "cautious" on its sales outlook because the economic climate is "uncertain" and consumer sentiment "fragile."
BHP, Rio Venture
BHP Billiton Ltd. and Rio Tinto Group sank 1.2 percent and 1.6 percent respectively in London as the mining companies abandoned a plan to create the world's largest iron-ore exporter after regulators from Europe to Asia said it would limit competition. The MSCI Asia Pacific Index dropped 0.6 percent.
The decline in U.S. equity futures indicated the S&P 500 will pare two straight weeks of gains.
Citigroup Inc. reported profit of 7 cents a share, compared with 5 cents a share forecast by analysts in a Bloomberg survey. The stock rose 0.8 percent in pre-market trading. Halliburton Co. reported net income jumped to 60 cents a share in the third quarter from 29 cents a year earlier. Twelve members of the 30-stock Dow Jones Industrial Average are due to post earnings this week.
Of the 24 companies in the S&P 500 that have announced results since Oct. 7, 18 have beaten analyst estimates for per- share income, according to data compiled by Bloomberg.
Emerging Markets
The MSCI gauge of 21 developing countries lost 1.1 percent, heading for the biggest drop since August. Investors should start to "scale back" their holdings of emerging market stocks after this year's rally lifted valuations and the economic outlook worsened, Jonathan Garner, the chief Asia and emerging- market strategist at Morgan Stanley in Hong Kong, wrote in a report today. The Bloomberg-JPMorgan Asia Dollar Index slipped 0.3 percent on concern regional central banks will seek to counter currency appreciation to protect export industries.
The dollar strengthened against all of its 16 most-traded counterparts except for the yen and Swiss franc, appreciating 0.5 percent to $1.3905 per euro and rising 1.3 percent versus the Norwegian kroner. The yen advanced 0.2 percent to 81.3 per dollar and climbed 0.8 percent to 113.02 per euro.
Stimulus Debate
The yield on the 30-year Treasury slipped five basis points to 3.94 percent, while the 10-year German bund yield was little changed at 2.38 percent. The similar-maturity U.K. gilt yield was little changed at 2.95 percent. Credit-default swaps insuring European junk-rated bonds increased, with the Markit iTraxx Crossover Index climbing 5 basis points to 475, according to Markit Group Ltd. Default swap rise as the perception of creditworthiness deteriorate.
European Central Bank President Jean-Claude Trichet rejected Bundesbank President Axel Weber's call to end the bond purchase program that has helped European governments and banks try to shore up their finances. Weber, who also sits on the ECB's 22-member decision-making council, said the risk of "exiting too late" from the emergency measures was greater than pulling out too soon.
Copper for delivery in three months declined 0.5 percent on the London Metal Exchange. Gold for immediate delivery slipped 0.4 percent to $1,362.43 an ounce and palladium retreated 1.7 percent. Crude oil futures increased 0.2 percent to $81.40 a barrel in New York.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: Michael P. Regan in New York at mregan12@bloomberg.net .
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