The dollar weakened to a seven- month low against the yen and Treasuries rose amid speculation the Federal Reserve will unveil more stimulus today. European stocks dropped from a 14-month high as European Aeronautic, Defence & Space Co. and BAE Systems Plc fell on plans to merge.
The dollar depreciated 0.3 percent to 77.63 yen at 8:35 a.m. in New York. The yield on 10-year Treasuries fell three basis points. The yield spread between Dutch and German 10-year debt narrowed to the least since January after an election in the Netherlands. The Stoxx Europe 600 Index lost 0.4 percent as BAE dropped 7.6 percent and EADS sank 8.8 percent. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent. Oil increased 0.3 percent to $97.30 a barrel.
The Fed will probably announce a third series of bond purchases known as quantitative easing, according to almost two- thirds of economists in a Bloomberg survey. A report today showed jobless claims rose more than forecast last week. EADS (EAD), the parent of Airbus SAS, would control 60 percent of the new entity, with London-based BAE owning the rest, the companies said yesterday.
“Markets are slightly nervous in anticipation of quantitative easing,” Lim Say Boon, chief investment officer at DBS Private Bank, said on Bloomberg Television in Singapore. “If we get QE3 then the markets, beyond this period of nervousness, are likely to rally even further.”
The Stoxx 600 retreated from its highest level since July 2011. EADS and BAE Systems dropped as Barclays Plc said that both companies’ shareholders may adjust their positions following yesterday’s announcement of a combination.
Next Plc slumped 5.8 percent, its biggest decline in more than two years, as the U.K.’s second-largest retailer said that trading in August and early September was “unusually quiet.” A gauge of lenders contributed the most to the Stoxx 600 (SXXP)’s slide.
In Australia, Fortescue Metals Group Ltd., the country’s third-biggest iron ore producer, dropped 14 percent as the Australian Financial Review reported it sought a debt covenant waiver from its lenders for the next 12 months.
S&P 500 futures slipped, indicating the equity benchmark will halt a two-day gain. Jobless claims increased 15,000 in the week ended Sept. 8, the biggest gain in almost two months, to 382,000, the Labor Department said. The median forecast of 50 economists surveyed by Bloomberg called for 370,000 claims. Tropical Storm Isaac resulted in about 9,000 applications for benefits, the agency said.
The dollar fell as much as 0.4 percent to 77.58 yen, the lowest since Feb. 14. The franc weakened 0.2 percent against the euro. The Swiss central bank vowed to keep defending the franc by buying foreign currencies in “unlimited quantities.”
Ten-year Treasuries advanced for the first time in three days, pushing the yield down three basis points to 1.73 percent.
The Dutch-German 10-year yield spread narrowed to 24.6 basis points, the least since Jan. 17. The rate on Spain’s 10- year securities climbed seven basis points to 5.69 percent and Italy’s 10-year yield rose two basis points to 5.05 percent as the government sold 6.5 billion euros ($8.4 billion) of debt maturing between 2015 and 2026.
The MSCI Emerging Markets Index (MXEF) fell 0.1 percent. The Shanghai Composite Index dropped 0.8 percent after the official Xinhua News Agency said massive stimulus measures would be “detrimental” to sustainable growth and as China’s central bank issued 28-day reverse-repurchase contracts for the first time in a decade, damping speculation reserve requirements will be cut. Russia’s Micex Index slipped 0.5 percent.
South Africa’s rand tumbled 0.7 percent, extending yesterday’s 1.9 percent slide, as labor unrest spread in the mining industry. South Korea’s won declined 0.2 percent against the dollar and bond yields rose after the central bank unexpectedly kept rates unchanged.