Dollar Extends Advance as European Bonds, Stocks Retreat

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By Emma O’Brien and Nick Gentle

The dollar reached a fresh six-year high to the yen while Asian (MXAP) and European stocks fell amid speculation that U.S. interest rates will rise sooner than estimated and concern that China’s growth is slowing.

The greenback bought 106.63 yen by 8:18 a.m. in London while the Australian currency weakened 0.7 percent. The Stoxx Europe 600 Index fell 0.3 percent and Standard & Poor’s 500 Index futures declined 0.1 percent. Hong Kong’s Hang Seng Index retreated 1.8 percent as Chinese Premier Li Keqiang announced money-supply growth that was the slowest in five months. Yields on U.K., French and German bonds gained at least one basis point. Nickel extended yesterday’s 5 percent slump.

The U.S. reports on wholesale inventories today, as investors including BlackRock Inc. speculate that an improving labor market and signs of inflation may justify sooner-than-forecast rate increases by the Federal Reserve. China releases data on lending and money supply this week, with economists estimating aggregate financing will cap its biggest two-month slump since 2011. French Finance Minister Michel Sapin cut the country’s growth forecast to 1.5 percent even as industrial output unexpectedly climbed in July.

“Investors are shifting their focus towards the end of quantitative easing and the commencement of interest rate hikes by the Fed,” Keith Poore, who helps manage $131 billion as Wellington-based head of investment strategy at AMP Capital Investors Ltd., said by phone. “If they tighten prematurely, the global economy could slide back into recession, but I don’t think they would.”

Group Movers

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, added 0.2 percent and is heading for a 14-month closing high. The dollar climbed against most major currencies except Britain’s pound, the Taiwan dollar and China’s yuan. The greenback is up by at least 2.8 percent versus all Group of 10 counterparts this quarter.

Japan’s Topix index climbed 0.6 percent as the yen retreated, erasing the stock gauge’s loss for the year. The yen slid 0.4 percent. The currency retreated 2 percent this month through yesterday versus its U.S. counterpart and traded today at its lowest level since September 2008.

Australia’s currency traded at 91.39 U.S. cents, below its 200-day moving average and the lowest intraday level since March 25. India’s rupee, the Philippines peso, South African rand and Turkey’s lira all weakened by at least 0.4 percent to the dollar.

The U.K. pound climbed 0.2 percent to $1.6133 after sliding to the weakest level since November on Sept. 8 after an opinion poll put support for Scottish independence in front for the first time this year.

Yuan Fixing

China’s yuan rose to the highest in almost six months as the People’s Bank of China increased the fixing by 0.15 percent to 6.1425 per dollar, the strongest since March 19. This takes the rate’s two-day advance to 0.46 percent, the most since August 2011.

Treasury notes due in a decade were little changed, yielding 2.51 percent after falling a fourth day yesterday, their longest rout in three months. The notes are the world’s worst- performing bonds this quarter before a government auction of the securities today.

The Treasury sold $27 billion of three-year notes at the highest yield since April 2011 yesterday as part of $61 billion of bond sales this week. The rate on three-year notes was 1.066 percent today, up three basis points and matching the so-called high yield paid at the auction.

Rate Bets

BlackRock’s Chief Investment Officer Rick Rieder said interest rates are likely to drift higher as research from the Federal Reserve Bank of San Francisco Sept. 8 indicated investors may be underestimating how quickly U.S. policy makers may tighten policy. Rieder said last month in a Twitter post that the Fed may increase rates early in 2015. Fed officials next meet Sept. 16-17.

Seventeen of the 19 industry groups on the Stoxx 600 retreated today. Banco Santander SA dropped 1.2 percent after Spain’s largest bank said Chairman Emilio Botin died. THe board will meet today to name a successor.

Fiat SpA gained 0.5 percent as Ferrari Chairman Luca Cordero di Montezemolo resigned after 23 years at the helm of the super-car maker because of a clash over strategy with the brand’s parent.

The Hang Seng Index is down for a fourth straight day, the longest such streak since the period ended June 19. A gauge of Chinese companies listed in the city retreated 2.4 percent, the most since April 11, as banks and energy companies declined.

Money Supply

China’s M2 money supply, the government’s broadest measure, rose 12.8 percent in August from a year earlier, Premier Li said yesterday in Tianjin, the state-run Xinhua News Agency reported ahead of the official release by the People’s Bank of China. That compares with a 13.5 percent pace in July, which was also the median estimate for August in a Bloomberg News survey of analysts.

Apple Inc. (AAPL) dropped to $97.99 in New York, after advancing during the trading session to within a point of an intraday record. The stock, which is still up 22 percent this year, has typically fallen on other days when Apple introduced new products. Shares dropped 2.3 percent Sept. 10, 2013, the day the iPhone 5s and 5c debuted.

The iShares PHLX Semiconductor ETF (EWT), which tracks U.S.- traded stock of Intel Corp. to Qualcomm Inc., fell for the first time in five days, while a similar ETF tracking Taiwanese shares lost 0.2 percent in New York.

Apple’s Asian suppliers retreated. Taiwan Semiconductor Manufacturing Co. slid 1.6 percent, Taipei-based Foxconn Technology Co. fell 1.2 percent and China’s AAC Technologies Holdings Inc. dropped 2.9 percent in Hong Kong.

Before yesterday’s 0.7 percent drop, the S&P 500 had not posted a move of more than 0.5 percent in either direction for 14 straight days, the longest streak since 1995, data compiled by Bloomberg show.

To contact the reporters on this story: Emma O’Brien in Wellington at [email protected]; Nick Gentle in Hong Kong at [email protected]

To contact the editors responsible for this story: Emma O’Brien at [email protected]; Nick Gentle at [email protected] Nick Gentle

 

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