U.S., Europe Stocks Drop; Treasuries Rise, Gold Rallies

December 30, 2014

New York (Dec 30)  U.S. stocks fell from near records, with the Standard & Poor’s 500 Index paring a seventh straight December gain, while Treasuries rose and gold surged. European and emerging equities slipped as energy shares declined.

The Standard & Poor’s 500 Index slid 0.3 percent at 10:12 a.m. in New York after closing at a record for the 53rd time in 2014. The Stoxx Europe 600 Index lost 0.8 percent to extend a December drop. The MSCI Emerging Markets Index fell 0.4 percent to push its loss this year to near 5 percent. Gold surged 2.1 percent to $1206.10 an ounce. Russia’s ruble strengthened 2 percent, trimming its worst year since 1998. The yield on 10-year Treasury notes fell three basis points to 2.17 percent.

The S&P 500 has risen 0.8 percent in December, bolstered by the fastest expansion for the American economy in more than a decade. A report showed U.S. consumer confidence increased less than estimated this month. Oil traded near the lowest since 2009 in New York and London amid speculation U.S. crude inventories will stay at the highest for the time of year in at least three decades. Greek Prime Minister Antonis Samaras will request elections for Jan. 25, with the anti-austerity party Syriza leading polls.

“We could be seeing a little bit of profit-taking coming into year-end,” David Lafferty, who helps oversee $894 billion as the chief market strategist for Natixis Global Asset Management in Boston, said in a phone interview. “Oil has been down a little bit, and you don’t have a lot going on other than that. Volume will tend to be very light through year-end, and we anticipate it being quiet.”

Equity Rally

Trading in S&P 500 shares was 45 percent below the 30-day average at this time of day.

The S&P 500 has gained 13 percent this year, while the Dow is up 8.5 percent in 2014 after climbing above 18,000 for the first time last week. The Russell 2000 of small-cap stocks climbed to an all-time high on Dec. 26. The Nasdaq Composite Index reached its highest since March 2000 that same day, closing about 5 percent below its record.

The gains for U.S. equities come amid a slump for the rest of the world. While the S&P 500 is heading for a third straight annual advance, the MSCI All-Country World Index excluding the U.S. is down 6.1 percent for the year.

The Conference Board’s consumer confidence index increased to 92.6 in December from 91 a month earlier, the New York-based private research group said today.

“The U.S. economy is doing well,” Herbert Perus, who helps oversee $36 billion as head of equities at Raiffeisen Capital Management in Vienna, said in an interview. “Some stocks seem overpriced, but if you look deeper into the market you find a lot of good managed companies with good products that are still not expensive.”

Bonds, Gold

Treasuries rose, pushing 10-year yields to the lowest level in a week, as investors sought the relative safety of U.S. government securities amid a retreat by oil prices and a drop in stocks.

Gold’s comes after the metal for February delivery fell 1.1 percent yesterday, the most since Dec. 22. Gold is heading for a second annual loss after the dollar strengthened and investors speculated that the Federal Reserve will raise interest rates in 2015.

Europe’s benchmark equities index headed for the first December decline since 2008 and emerging-market shares slid toward a second yearly decline as energy shares continued to retreat. Total SA and Royal Dutch Shell Plc slid at least 1.7 percent.

A measure of developing-nation energy shares is poised for its steepest annual drop since 2008. Energy shares in the MSCI Emerging Markets Index slid 1.4 percent today, extending its drop in 2014 to 28 percent.

Oil Moves

West Texas Intermediate and Brent crude prices fluctuated near the lowest closing since 2009 after erasing earlier declines. The U.S. benchmark slumped 46 percent this year as the largest U.S. oil output in about 30 years combines with slowing global demand and the refusal of the Organization of Petroleum Exporting Countries to reduce production levels.

Italy’s 10-year yield dropped nine basis points, or 0.09 percentage point, in the secondary market to 1.89 percent. The Italian government sold 2.996 billion euros ($3.6 billion) in 2.5 percent 10-year bonds in an auction today at a record-low average yield of 1.89 percent, the Bank of Italy said.

The auction caps the best year for European government bonds since 1995 and a rally that has sent borrowing costs from Germany to Ireland to all-time lows.

Three-year yields in Greece held above 12 percent. The nation’s early return to the ballot box was sealed yesterday when Samaras failed to get his candidate, Stavros Dimas, confirmed by the requisite supermajority of 180 lawmakers.

Greece, Ruble

Credit-default swaps insuring $10 million of Greek debt for five years were quoted at $3.68 million upfront and $500,000 annually, signaling a 64 percent probability of default, according to CMA.

The ruble rose 2 percent against the dollar on speculation Russia stepped in to shore up the currency on the final trading day of the year. The Micex Index (INDEXCF) slid 2.6 percent, headed for the first decline in three years.

Rubber for June delivery rallied to 213.3 yen a kilogram on the Tokyo Commodity Exchange and palm oil climbed as much as 0.8 percent in Kuala Lumpur as flooding across Malaysia and parts of Thailand hurt supplies of both commodities and forecasters predicted more rain.

Source: Bloomberg

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