US GDP report strengthens dollar

September 26, 2014 04:56 AM

The dollar strengthened and Treasuries fell after a report on U.S. economic growth. Standard & Poor’s 500 Index (CME:SPU14) futures were little changed, with the gauge heading for its worst week in two months.

The Bloomberg Dollar Spot Index extended its highest level since 2010. Treasury 10-year yields rose three basis points to 2.54 percent. S&P 500 futures were little changed after the gauge sank the most since July 31 yesterday. The Stoxx Europe 600 Index climbed 0.1 percent after earlier sliding as much as 0.5 percent.

Gross domestic product in the world’s largest economy grew at the fastest pace since 2011 in the second quarter. About $1.42 trillion has been wiped from the value of global shares this month amid concern Chinese economic growth is slowing and speculation about the timing of U.S. interest-rates increases. Russia, Ukraine and European Union officials resumed negotiations to seek a resolution to a dispute that led to Russia ending gas sales to its neighbor in June.

U.S. GDP rose at a 4.6 percent annualized rate, up from an August estimate of 4.2 percent, Commerce Department data showed. The increase matched the median forecast in a Bloomberg survey of economists.

Final data will show the Thomson Reuters/University of Michigan consumer-sentiment index rose to 84.8 this month, a separate survey projected. That would be the highest in more than a year. A preliminary figure came at 84.6.


Dollar Gains
The Bloomberg Dollar Spot Index climbed 0.3 percent for a sixth day of gains, the longest streak since July. The U.S. currency rose 0.4 percent to 109.23 yen as Japan’s government presses ahead with reforms that would allow the nation’s $1.2 trillion pension fund to buy more overseas assets.

Futures on the S&P 500 expiring in December were little changed after the index closed at its lowest level since Aug. 15, heading for a 2.2 percent drop this week. The MSCI All- Country World Index is down 0.2 percent today, set for a 2.4 percent decline this week and its lowest level since Aug. 8.

Nasdaq 100 Index contracts were little changed today after a slump in Apple Inc. pushed the gauge for its biggest loss since April 10 yesterday.

Nike Inc. jumped 7.8 percent in early New York trading after reporting first-quarter profit that exceeded analysts’ estimates.

Even as $320 billion was erased from U.S. equity values yesterday and all but 14 companies in S&P 500 fell, volatility gauges signaled investors have yet to enter panic mode.


No Panic
The 18 percent increase in the Chicago Board Options Exchange Volatility Index sent the measure to 15.64 yesterday, below its peak level during every major drop since 2012, data compiled by Bloomberg show. The VIX, derived from the price of options used to hedge against losses, is hovering around its average level from the past three years, the data show.

“This week’s consolidation in U.S. stocks is not surprising,” Francois Savary, chief investment officer of Reyl & Cie., said by phone from Geneva. “The potential for the market is limited for the rest of the year, especially considering that the strength of the dollar might have an impact on company earnings. There’s still uncertainty regarding the timing of interest rate hikes -- I think the U.S. economy could surprise on the upside.”

In Europe, the Stoxx 600 has dropped 1.8 percent this week, the most since August, and closed at an almost one-month low yesterday. A gauge of real estate companies posted the biggest advance among 19 industry groups today, while insurers fell the most.


Emerging Markets
The MSCI Emerging Markets Index retreated, extending its lowest level since May. It’s set for a 3.2 percent drop this week, a third consecutive decline. Russia’s Micex Index fell 0.6 percent, and the ruble depreciated 1.5 percent versus the dollar, poised for a record low. Russian prosecutors filed a suit to regain state ownership of OAO Bashneft, the oil producer controlled by Vladimir Evtushenkov’s AFK Sistema.

U.K. natural gas climbed 1.2 percent for a third consecutive gain. Russia supplies about 30 percent of European gas needs and ships half of it via Ukraine, whose imports from its eastern neighbor halted June 16 in a price and debt dispute.

Cotton jumped 1.3 percent, the first gain in three days, after falling to the lowest since 2009 yesterday.

West Texas Intermediate oil rose 0.3 percent to $92.76 a barrel, reversing an earlier loss of as much as 0.3 percent. Oil demand is growing at its slowest since 2011, while the U.S. shale boom means production outside OPEC is rising by the most since the 1980s, the Paris-based International Energy Agency said in a monthly report Sept. 11.

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