Spanish bonds decline on ECB doubts

Spanish bonds decline on ECB doubts - Stocks - FOREX - Trading

U.S. stocks fell for a fourth day and Spanish bonds tumbled after the European Central Bank kept rates on hold and President Mario Draghi failed to reassure investors he was ready to take immediate steps to support the economy. Treasuries gained, while oil declined.

The Standard & Poor’s 500 Index slid 0.2 percent as of 10:31 a.m. in New York. Canada’s S&P/TSX composite index fell 24 points to 11,594. Spain’s IBEX 35 retreated 2.9 percent and the Stoxx Europe 600 Index lost 0.5 percent. The euro weakened 0.1 percent to $1.2208, reversing earlier gains. Oil slumped 1.3 percent to $87.74 a barrel in New York. The 10-year Treasury yield dropped three basis points to 1.49 percent. Spanish 10-year yields advanced 29 basis points to 7.02 percent.


Draghi signaled the bank will join forces with governments to buy sovereign bonds in sufficient quantities to remove all doubts about the future of the euro. Any ECB bond purchases will be conducted in a way to soothe investors’ concerns about seniority, Draghi said at a press conference today, after keeping the benchmark interest rate on hold at 0.75 percent. Details of the bond purchase plan will be fleshed out in coming weeks, he said.

“The market is clearly disappointed with the ECB announcement this morning,” John Bailey, chief executive officer and founder of Spruce Private Investors, which manages $3 billion, said on a phone interview. Draghi “built up expectations, as we saw in the rally last week, and this disappointment is a function of strong talk from Europe, followed by inaction.”

Jobless claims rose less than economists anticipated, Labor Department data showed before tomorrow’s monthly payrolls report. The employment report for July is projected to show payrolls increased by 100,000 after a 80,000 gain in June, according to the Bloomberg survey median. The jobless rate, which has been stuck above 8 percent since February 2009, was probably at 8.2 percent for a third moth.

The S&P 500 has fallen 1.1 percent this week, poised for the first decline in four weeks. Knight Capital Group Inc. plunged 49 percent after saying losses from yesterday’s trading breakdown are $440 million, more than some analysts had estimated, and it is exploring strategic and financial alternatives. Abercrombie & Fitch Co. tumbled 13 percent after the teen retailer cut its profit forecast. First Solar Inc., the biggest maker of thin-film panels, soared 27 percent after an 81 percent jump in earnings.

Jobless claims climbed by 8,000 to 365,000 in the week ended July 28, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for an increase to 370,000.
The euro dropped 0.5 percent to 95.45 yen after rising as much as 1.1 percent. The European currency weakened against all but one of its major counterparts.
Italy’s 10-year yield climbed 24 basis points to 6.17 percent. The German 10-year bund yield tumbled eight basis points to 1.29 percent.

Financial markets and politicians had ratcheted up pressure on the ECB to act after Draghi pledged last week to do “whatever it takes” to save a euro battered for almost three years by spiraling bond yields in countries from Spain to Greece. The Bundesbank reiterated last week that it opposes further purchases of sovereign debt by the ECB, as they blur the line between fiscal and monetary policy.
“The market was anticipating we would get an actual plan as opposed to the measures that they appear to be considering,” said Jim Vogel, head of agency-debt research at FTN Financial in Memphis, Tennessee. “It doesn’t quite match the buildup to this morning’s press conference. It’s not yet the all-clearing announcement that people were anticipating.”

The MSCI Emerging Markets Index retreated 0.7 percent, snapping a five-day rally. The Hang Seng China Enterprises Index lost 1 percent, its steepest drop since July 23. The Shanghai Composite Index slipped 0.6 percent, as Poly Real Estate Group Co., China’s second-largest property developer, tumbled 9.2 percent, the most since April 2010. Russia’s Micex Index jumped 0.2 percent, while India’s Sensex Index declined 0.2 percent.