Commodities, stocks fall as dollar gains; t-bill yield drops to record low
Commodities fell for a second day and emerging-market stocks dropped the most in two weeks, while the dollar rallied against the euro. The 12-month Treasury yield declined to a record low and U.S. index futures slipped.
The Standard & Poor’s GSCI index of 24 commodities slid 0.9 percent at 7:50 a.m. in New York as silver decreased 5.2 percent and oil retreated 0.9 percent. The MSCI Emerging Markets Index lost 1.3 percent, led by India. The Stoxx Europe 600 Index sank 0.8 percent, and S&P 500 Index (SPX) futures fell 0.5 percent. The dollar strengthened 0.3 percent against the euro, while the yield on the U.S. 12-month bill slipped to 0.173 percent. The pound depreciated against all 16 of its major peers.
Investors are paring risk as they assess the likely impact of the May 1 killing by U.S. forces of al-Qaeda leader Osama bin Laden in Pakistan. India’s central bank raised interest rates by a more-than-estimated 0.5 percentage point today after forecasting inflation will stay at an “elevated level,” while Australian policy makers kept rates on hold. An index of U.K. manufacturing by Markit Economics and the Chartered Institute of Purchasing and Supply unexpectedly fell in March.
“Concerns about potential retaliation and any sort of fallout in terms of further terrorism is one factor leading to some increase in risk aversion,” said Mitul Kotecha, the Hong Kong-based head of global foreign-exchange strategy at Credit Agricole CIB.
Silver futures dropped $2.38 to $43.70 an ounce, crude oil declined $1.01 to $112.51 a barrel and wheat fell 0.9 percent. The GSCI Total Return Index has beaten bonds, stocks and the dollar every month since December, the longest in at least 14 years.
The MSCI Emerging Markets Index retreated for the first time in three days after closing yesterday at the highest level since 2008. India’s Bombay Stock Exchange Sensitive Index dropped 2.4 percent, the most in more than 10 weeks. The Reserve Bank of India’s rate decision was forecast by seven of 25 economists in a Bloomberg News survey. Russia’s Micex Index sank 2.2 percent and South Korea’s Kospi Index (KOSPI) lost 1.3 percent.
Europe’s Stoxx 600 fell for the first time in nine days. Daimler AG (DAI) and Volkswagen AG (VOW) dropped more than 2 percent following a Financial Times Deutschland report suggesting that tax incentives on company cars are too lenient. Swiss Life Holding AG (SLHN), Switzerland’s biggest life insurer, sank 4.6 percent after first-quarter premiums fell. Hannover Re slid 3 percent as the world’s third-largest reinsurer cut its profit forecast.
The drop in S&P 500 futures indicated the benchmark gauge for U.S. equities will fall for a second day. A report from the Commerce Department at 10 a.m. in Washington may show factory orders rose 2 percent in March after a 0.1 percent decline the previous month, according to a Bloomberg survey of economists.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, rose 0.4 percent, increasing for a second day. The yen strengthened against all 16 of its most- traded counterparts, appreciating 0.9 percent versus the euro and rising 0.6 percent against the dollar.
The pound depreciated 1.6 percent versus the euro after a gauge of U.K. manufacturing fell to a seven-month low in April.
Australia’s dollar slid for the second day against the greenback, falling 0.8 percent.