Yen, Dollar Rise on Rate Outlook; Stocks, Commodities Decline
Dec. 7 (Bloomberg) -- The yen strengthened and the dollarrose the most in a month against the euro, as investors weighedwhether the world economy is recovering fast enough to warranthigher central bank interest rates. U.S. stock index futures andcommodities fell.
The yen advanced against all 16 most-traded currenciestracked by Bloomberg as of 10:35 a.m. in London. The dollargained versus 15. The MSCI Emerging Markets Index dropped themost in six days, losing 0.6 percent. Dubai’s equity indexplunged 6.2 percent to a four-month low. The Dow Jones Stoxx 600Index of European companies sank 0.7 percent. Futures on theStandard & Poor’s 500 Index slipped 0.4 percent, while gold fellfor a third day.
Federal Reserve Chairman Ben Bernanke speaks today for thefirst time since the Dec. 4 U.S. employment report signaled asurprise drop in the jobless rate, stoking expectations the Fedmay raise rates sooner than economists had anticipated.Investors are concerned banks may have to increase writedownsthat have reached $1.7 trillion worldwide since the creditcrunch began, as Dubai World seeks to delay payment on $26billion of debt.
“On the U.S. dollar front we now have an early indicationon the level of volatility that a shift in monetary policy cantrigger,” Khurram Butt, in the Treasury sales division ofEurope Arab Bank Plc in London, wrote in a client note. “Beforethe job report, the chances of a June Federal Reserve rate hikewas implied at only 35 percent, but this jumped to above 50percent after the unemployment number came out.”
Yen, Dollar Gain
The yen rose most against higher-yielding currencies,advancing 1.5 percent versus the New Zealand dollar. The U.S.dollar traded at its highest level since Nov. 4 versus the euro,extending gains at the end of last week that followed the U.S.employment report.
The U.S. lost 11,000 jobs in November, less than the125,000 median forecast of 82 economists in a Bloomberg survey,the Labor Department said Dec. 4. Fed-funds futures contracts onthe Chicago Board of Trade showed today a 16 percent probabilitythe central bank will increase its benchmark overnight rate toat least 0.5 percent by March, up from 8.3 percent a week ago.
The MSCI World Index of 23 developed nations’ stocksretreated 0.5 percent. The MSCI Asia Pacific Index rose 0.3percent as the region’s exporters increased. Canon Inc., theworld’s largest maker of cameras, added 3.3 percent in Tokyo.Billabong International Ltd., a clothing maker that generatesmore than half its sales in the Americas, added 4.9 percent inSydney.
Futures Fall
Fresnillo Plc, the world’s largest primary silver producer,and Xstrata Plc led basic-resources producers lower in London,each sinking at least 2.1 percent. Siemens AG, Europe’s biggestengineering company, slipped 2.3 percent in Frankfurt afterMorgan Stanley cut its recommendation on the shares.
The decline in U.S. stock-index futures indicated the S&P500 may retreat from last week’s advance. The Fed on Nov. 4pledged to keep its benchmark overnight lending rate near zerofor an “extended period.” The jobs report showed theunemployment rate unexpectedly dropped to 10 percent from 10.2percent in November.
The Dubai Financial Market General Index sank the mostamong benchmark equity indexes worldwide. The measure hastumbled 17 percent since Dubai announced on Nov. 25 that state-owned Dubai World would ask creditors for a “standstill”agreement on its debt, including property company Nakheel PJSC’s$3.5 billion bond due for repayment in a week.
Russian Stocks
Russia’s Micex Index dropped 1.9 percent as oil company OAORosneft sank on falling crude prices. South Africa’s FTSE/JSEAfrica All Shares Index declined 1.7 percent, after goldproducer AngloGold Ashanti Ltd. retreated 4.3 percent.
Gold for immediate delivery fell for a third day in London,slumping 1.6 percent to $1,142.97 an ounce. The metal reached arecord $1,226.56 on Dec. 3. Copper for delivery in three monthsretreated 1.3 percent on the London Metal Exchange, leading adrop in industrial metals. Oil for January delivery fell 0.7percent to $74.92 a barrel in New York trading.
Treasuries rose, with the 10-year note yield dropping 3basis points to 3.44 percent, even as the U.S. governmentprepared to sell $74 billion in notes and bonds this week,starting with an auction of $40 billion of three-year notestomorrow. The yield on the German bund fell 2 basis points to3.21 percent.
To contact the reporter on this story:Justin Carrigan in London at jcarrigan@bloomberg.net
Last Updated: December 7, 2009 05:37 ESTSource: Bloomberg
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