Dollar Gains With Bonds as Europe Stocks Fall; Gold Drops

Frankfurt (Nov 14)  The dollar strengthened to a seven-year high against the yen and gold declined. European stocks fell while bonds gained amid speculation the region’s economy will be slow to recover.

The dollar appreciated 0.6 percent to 116.44 yen at 7:30 a.m. in New York. Gold slid 0.8 percent. Stoxx Europe 600 Index slipped 0.3 percent and Standard & Poor’s 500 Index futures were little changed. The yield on Italy’s 10-year bond fell two basis points. The ruble headed for its 10th weekly decline and the cost of protecting Russian debt against default climbed to a three-year high. Hong Kong stock-index futures gained after China said it will waive capital-gains taxes for foreign investors and mainland individuals using the Shanghai-Hong Kong bourse link.

International investors said the world economy is in its worst shape in two years and the danger of deflation rising, according to a Bloomberg Global Poll this week. Data showed today a rebound in Germany and France kept the euro-area economy growing in the third quarter, bolstering the case for continued stimulus, as Group of 20 leaders prepared for this weekend’s summit in Australia.

“The GDP numbers this morning were proof again of the current economic challenges,” Guillermo Hernandez Sampere, who helps oversee the equivalent of $168 million at MPPM EK in Eppstein, Germany, wrote in an e-mail. “Markets are still worried about the European economy.”

The dollar climbed against 13 of its 16 major peers. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 of its most-traded peers, rose 0.3 percent.

U.S. retail sales probably rebounded in October, economists said in a Bloomberg survey before a Commerce Department report today.

European Stocks

Two shares declined for every one that advanced in the Stoxx 600, with trading volumes 16 percent less than the 30-day average, according to data compiled by Bloomberg. Commodity producers led the retreated, with BHP Billiton Ltd. and Rio Tinto Group fall 1.5 percent.

SBM Offshore NV declined 5.9 percent, the biggest slump in three months, after Brazilian authorities said the company won’t be invited to bid for contracts from the state-controlled Petroleo Brasileiro SA until a bribery investigation is completed.

Abengoa SA tumbled 26 percent to an almost one-year low amid concern orders are slowing for the Spanish energy and environment company.

Schibsted ASA rallied 25 percent, the most since 2000, as the Norwegian media company announced a deal for joint ventures in online classifieds with Naspers Ltd., Telenor ASA and Singapore Press Holdings Ltd.

Emerging Markets

The MSCI Emerging Markets Index lost 0.4 percent, leaving the gauge little changed on the week.

The ruble weakened 0.6 percent to 47.0705, extending its decline for the five-day period to 0.8 percent. Russia’s currency has dropped for 10 weeks, the longest slump since 2005.

Credit-default swaps insuring Russian government debt rose 7.5 basis points to 289 basis points, the highest since November 2011, according to data compiled by Bloomberg. The contracts have increased for all but one of the past 11 days, the data show.

Futures on the Hang Seng China Enterprises Index rose 1.3 percent after the official close of Hong Kong’s stock exchange and contracts on the Hang Seng Index climbed 0.8 percent.

China Connect

Chinese individuals who buy Hong Kong equities through the link get a three-year exemption, while mainland companies using the connect will be charged tax, the Ministry of Finance said in a statement today, clarifying its rules three days before the program’s debut.

WTI for December delivery reversed a loss, gaining 0.2 percent to $74.38 a barrel. The contract earlier slid as much as 1.3 percent to $73.25, the lowest since September 2010. Front-month prices are down for a seventh week, the longest stretch of decreases since 1986.

Source:  Bloomberg