Monday, 18 May, 2015

Dollar Rebounds as U.S. Stocks Hit Records; Treasuries Decline

(Bloomberg) — The dollar rose from a four-month low while Treasuries slid on speculation economic data this week will bolster the case for higher interest rates. A gain in Apple Inc. dragged U.S. stocks to record levels. The Standard & Poor’s 500 Index rose 0.2 percent at 11:35 a.m. in New York, extending an all-time high. Apple rose 1.3 percent after a billionaire investor called for a bigger buyback. The Bloomberg Dollar Spot Index climbed 0.6 percent, rebounding from its longest stretch of weekly slides since 2013. Treasury 10-year note yields gained eight basis points to 2.22 percent. Greece’s rate jumped 82 basis points as speculation grew its banks may be weeks from failing. Housing reports this week will provide additional clues on the strength of economic growth, while the Fed releases the minutes of its April meeting on May 20. Improving indicators would bolster the case for higher borrowing costs. The dollar’s fifth weekly retreat came amid data that showed tame inflation and continued labor-market strength, complicating the Fed’s rate decision. “It’s difficult to be too bullish, but it’s also difficult to build a bearish case,” Allan von Mehren, chief analyst at Danske Bank A/S, said by phone from Copenhagen. “This is why stocks seem to be stuck at the moment, although at quite high levels. The macro picture is not that great but it’s not a disaster quite yet.” The S&P 500 completed a second week of gains as multinational companies rallied amid the weaker dollar. The back-to-back weekly advance halts a string of five up-and-down periods. The gauge fell as much as 1.8 percent from its April 24 record through May 6, before rallying 2.1 percent since. Dollar Rebound Among stocks moving Monday, Ann Inc. jumped 21 percent after Ascena Retail Group Inc. agreed to buy the women’s apparel retailer for about $2.2 billion. Altera Corp. rallied 5.8 percent after a report said it has resumed talks with Intel Corp. about a potential buyout. Endo International Plc slipped 2.9 percent after agreeing to buy Par Pharmaceutical Holdings Inc. in a deal valued at $8.05 billion. Fed Bank of Chicago President Charles Evans repeated his call to hold interest rates near zero until early 2016 at a speech in Stockholm on Monday. The dollar strengthened against the euro for the first time in five days, gaining 0.6 percent to $1.1386 per euro. It reached $1.1467 on May 15, the weakest level since Feb. 6. “This could be the start of a more meaningful rebound in the dollar,” said Adam Myers, the European head of foreign-exchange strategy at Credit Agricole SA’s corporate and investment banking unit in London. “The data is going to improve quite quickly in the second quarter and the Fed will still tighten as planned in the third quarter this year.” Reserve Bank of Australia Deputy Governor Philip Lowe said policy makers retain scope to cut interest rates further while plans to curb New Zealand’s housing boom gave its central bank more room to take steps to support the economy, underlining divergence with the Fed as it gauges when to raise rates. Europe Bonds The euro was also weighed down Monday by concern that Greek banks could be pushed toward insolvency if the government fails to reach an agreement with creditors. European Union leaders meet in Riga from May 21. Greece’s ASE Index erased losses to rally 1 percent after a report that the European Commission is proposing a deal compromise. The Stoxx Europe 600 climbed 0.4 percent. German 10-year yields rose three basis points to 0.66 percent and rates on Portugal’s bonds climbed 14 basis points to 2.43 percent. Italy’s jumped 14 basis points to 1.91 percent. The Hang Seng China Enterprises and Shanghai Composite Index both fell 0.6 percent. Twenty Chinese companies are scheduled to sell initial public offering shares from Tuesday to Thursday, which may freeze 2.8 trillion yuan ($451.1 billion), based on the median estimate of a Bloomberg survey. West Texas Intermediate crude slipped to $59.58 a barrel after rising for the previous nine weeks, the longest run since futures began trading in 1983. Brent crude slid 0.8 percent to $66.28. Archr LLP is Authorised and regulated by the Financial Conduct Authority (FCA reference 617163). 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