Thursday, 04 June, 2015

Global Bond Slump Deepens as European Shares Slide, Ruble Drops

(Bloomberg) — German bonds fell, sending 10-year yields to an eight-month high, as the rout in the global debt market gathered pace. Stocks retreated around the world, commodities dropped and Russia’s ruble led emerging-market currencies lower. Yields on benchmark German bunds climbed six basis points to 0.94 percent by 10:25 a.m. in London, leading a selloff that sent Treasury yields to the highest since October. The euro strengthened against 15 of 16 major peers. The Stoxx Europe 600 index fell 1.6 percent and Standard & Poor’s 500 Index futures dropped 0.6 percent. The ruble slid to a two-month low while the Bloomberg Commodity Index dropped before an OPEC meeting. This year’s gains in global bonds evaporated as the European Central Bank chief Mario Draghi forecast faster euro-area inflation and continued market volatility. Greek stocks led declines in Europe as the standoff with its creditors persisted after Prime Minister Alexis Tsipras rejected proposals that would unlock bailout funds. “There’s a huge selloff all over the world,” said Kim Youngsung, the head of overseas investment at South Korea’s Government Employees Pension Service in Seoul. “The European economy is back on track. The U.S. economy is stable. Suddenly we’re worried about inflation.” Initial jobless claims in the U.S. probably eased last week, economists said before a Labor Department report, the last employment figures ahead of tomorrow’s month payrolls data. Investor Revolt German bunds are at the epicenter of a deepening rout in world bonds. In an investor revolt against record-low yields on securities across the euro area, their yields have climbed from 0.049 percent on April 17. Yields on investment-grade bonds in euros climbed for a fourth day to a seven-month high, according to Bank of America Merrill Lynch Index data. French 10-year yields rose nine basis points to 1.27 percent on Thursday. U.K. 10-year gilt yields added seven basis points to 2.15 percent. Treasury 10-year note yields climbed five basis points to 2.41 percent and the Japanese rate rose three basis points to 0.49 percent and Australia’s topped 3 percent for the first time in three weeks. The euro strengthened as yields on the region’s bonds increased relative to those of their global peers. The yield gap between German bunds and U.S. Treasuries narrowed to the least since early February, at 144 basis points. Re-Pricing Growth “German bond yields are flying as people are re-pricing growth and inflation,” said Peter Rosenstreich, head of market strategy at Swissquote Bank SA in Gland, Switzerland. “With lower interest rate differentials between bunds and Treasuries, traders are piling back into the euro from the dollar.” The 19-nation shared currency surged 0.6 percent to $1.1330, reaching the strongest level since May 18. The Australian dollar slid 0.6 percent to 77.440 U.S. cents. Government figures on Thursday showed exports fell 6 percent in April from March, while retail sales were unexpectedly flat. The Stoxx 600 is heading for its lowest level in almost a month, led by declines in automakers and utility companies. Greece’s ASE Index lost 2.5 percent, the most among western-European markets. Deutsche Telekom AG gained 1.6 percent after the Wall Street Journal said its T-Mobile US Inc. is in talks to merge with Dish Network Corp. Syngenta AG climbed 1.5 percent after Reuters reported that BASF SE is weighing an offer to buy the Swiss maker of agrochemicals. BASF fell 1.5 percent. EasyJet Plc added 1.5 percent after saying passengers increased in the 12 months through May. Emerging Markets S&P 500 E-mini futures expiring this month fell after the index rose 0.2 percent on Wednesday. The MSCI Emerging Markets Index declined 0.8 percent and a Bloomberg gauge of 20 currencies dropped 0.3 percent. South Korea’s won declined 0.8 percent while Turkey’s lira and South Africa’s rand both lost 0.5 percent. Russia’s ruble slid 1.4 percent, extending 2.9 percent slump on Wednesday. Reserves should reach a “comfortable” level of about $500 billion within the next few years from about $360 billion now, Bank of Russia Governor Elvira Nabiullina told the International Banking Congress in St. Petersburg on Thursday. The Shanghai Composite Index was little changed, after slumping as much as 5.4 percent earlier. Hong Kong’s Hang Seng China Enterprises Index of mainland companies rose 0.3 percent, after climbing 2 percent and sliding 2.4 percent. Taiwan’s Taiex index dropped 2.2 percent, the most in five months. Industrial metals led a 0.3 percent decline in the Bloomberg Commodity Index. Copper reached a one-month low, while nickel and zinc slid more than 1 percent. Brent crude dropped 0.4 percent on speculation the Organization of Petroleum Exporting Countries will refrain from cutting its production target on Friday. Iraq has signaled it will increase exports this month and Iran urging the group to make room for more production if global sanctions recede. Archr LLP is Authorised and regulated by the Financial Conduct Authority (FCA reference 617163). Archr LLP is not covered by the Financial Services Compensation Scheme (FSCS). Archr is registered in England and Wales No. OC371018. Registered office Chancery House, 30 St Johns Road, Woking, Surrey, GU21 7SA This message may contain confidential or privileged information. If you are not the intended recipient, please advise us immediately and delete this message. The unauthorised use, disclosure, distribution and/or copying of this e-mail or any information it contains is prohibited. 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