Government bonds fell around the world as the Federal Reserve moves closer to increasing interest rates, while Russia’s ruble tumbled to a record amid new sanctions. The Australian dollar led a decline in higher-yielding currencies.
German 10-year yields rose three basis points to 1.07 percent at 10 a.m. in London as the rate on similar-maturity Treasuries (USGG10YR) touched a six-week high of 2.57 percent. The Stoxx Europe 600 Index advanced 0.1 percent, snapping a five-day streak of losses, while U.S. equity index futures were little changed. Emerging-market stocks fell for a seventh day after Chinese lending data trailed estimates. The Australian dollar slid as much as 0.5 percent to 90.52 U.S. cents, its weakest level since March 24. Oil led a rebound in commodities from a five-year low.
U.S. data is forecast by economists to show strengthening retail sales, adding to the case for the Fed to raise borrowing costs. European Central Bank President Mario Draghi is meeting with the region’s finance ministers in Milan as the European Union expands its Russia sanctions list, adding 15 companies, including state-controlled energy firms, and 24 people.
“There has been quite a significant shift in terms of interest-rate expectations in the U.S.,” saidMitul Kotecha, the Singapore-based head of Asia-Pacific foreign-exchange strategy at Barclays Plc. “Higher U.S. yields combined with the relative outperformance of U.S. data is helping to propel the dollar forward. There’s a real contrast now between expectations of U.S. monetary policy and Europe and Japan.”
Fed Futures
There’s a 60 percent chance the U.S. central bank will increase its benchmark by July 2015, federal fund futures show, up from a 54 percent chance a month ago. The yield on Treasuries due in a decade climbed 10 basis points this week and is the highest since Aug. 1.
The Bloomberg Global Developed Sovereign Bond Index fell 2.2 percent in the past two weeks, the worst performance since June 2013. French 10-year bonds dropped for a fifth straight day, pushing the yield two basis points higher to 1.42 percent. The rate on similar-maturity U.K. gilts climbed two basis points to 2.52 percent.
The Bloomberg Dollar Spot Index (BCOM), which tracks the greenback against 10 major counterparts, was little changed, set for a 1.1 percent advance this week, the most since the period ended Nov. 1. It earlier touched the highest since July 2013.
Yen Slide
The yen slid 0.1 percent to 107.21 per dollar after weakening 0.2 percent yesterday in a fourth straight day of declines. Japan’s currency is down 2.1 percent this week, set for its steepest weekly loss since June 2013 and the worst performance among Group of 10 currencies after the Australian dollar. The yen reached 107.39 today, the weakest intraday level since Sept. 22, 2008.
Russia’s ruble weakened as much as 0.6 percent to 37.7265 per dollar before trading 0.3 percent lower. The Micex Index advanced 0.9 percent, trimming this week’s decline to 0.9 percent.
The U.S. will “deepen and broaden” measures against Russia’s financial, energy, and defense industries, President Barack Obama said in a statement yesterday, hours after an announcement by the European Union. The latest round of economic restrictions from both the U.S. and the EU will take effect today.
Banned Goods
Russia’s Economy Ministry drafted a list of goods that may be banned in retaliation, including automobile imports, particularly used cars, as well as textiles and clothing, state-run RIA Novosti reported, citing Kremlin economic aide Andrei Belousov.
Russia’s central bank will probably keep interest rates unchanged at 8 percent today, according to 15 of 26 economists surveyed by Bloomberg. Policy makers have raised borrowing costs by 250 basis points since President Vladimir Putin’s incursion into Ukraine’s Crimea peninsula in March to stem the slide in the ruble.
The Stoxx 600 retreated 1.3 percent in the five days through yesterday. Sixteen of the 19 groups on the gauge advanced today as three stocks rose for every two that fell. The volume of shares changing hands in Stoxx 600-listed companies was 28 percent lower than the 30-day average, according to data compiled by Bloomberg.
Weight Loss
Novo Nordisk A/S advanced 2.9 percent after a Food and Drug Administration advisory panel supported the approval of its weight-loss injection Saxenda. Aveva Group Plc slumped 21 percent, its biggest drop in 16 years, after saying currency moves hurt first-half performance.
The MSCI Asia Pacific Index (MXAP) lost 0.3 percent, set for its longest losing streak in four years. China’s aggregate financing and money-supply growth missed estimates, while 702.5 billionyuan ($114.5 billion) of new loans were extended in August, close to the 700 billion estimate of economists.
The data come after figures yesterday showed consumer-price growth slowed more than economists expected in August and producer prices dropped 1.2 percent, exceeding the 1.1 percent decrease predicted by analysts.
The Hang Seng Index (HSI) slid 0.3 percent and the Hang Seng China Enterprises Index of Chinese companies listed in hong Kong fluctuated. Volume was about 17 percent less than the 30-day average for the time of day on Hong Kong’s benchmark index. (BGSV)
The Bloomberg Commodity Index of 22 raw materials rose 0.2 percent after yesterday falling to the lowest since July 2009. West Texas Intermediate oil climbed 0.6 percent to $93.39 a barrel and zinc jumped 0.9 percent to $2,285.25 a metric ton. Gold fell 0.3 percent to $1,237.23 an ounce and silver dropped 0.5 percent to $18.6137 an ounce after earlier today falling to the lowest since June 2013.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Michael Shanahan in London at mshanahan3@bloomberg.net
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