Euro Declines Before Spanish Debt Sale, German Sentiment

The shared currency slid 0.1 percent to 105.59 yen after dropping 0.2 percent to 105.67 yesterday.

The euro weakened against the dollar and yen as Spain prepares to sell debt in a market where concern the region’s fiscal crisis is spreading drove the nation’s borrowing costs to the highest this year.
The 17-nation currency also fell before data that may show confidence among investors in Germany, Europe’s biggest economy, declined from a 21-month high. Australia’s dollar slid for a third day versus its U.S. counterpart after the South Pacific nation’s Reserve Bank said slower inflation would increase the prospects of an interest-rate cut. China’s yuan rose as improving U.S. economic data boosted the nation’s export outlook.

“My feeling is that it’s still overall a bearish mood with regard to the euro,” said Kara Ordway, a currency strategist at City Index Group Ltd. in Sydney. The debt sale “will give us a first indication as to how currently people view Spain.”
The euro lost 0.3 percent to $1.3108 at 7:05 a.m. in London after reaching $1.2995 yesterday, the lowest level since Feb. 16. The shared currency fell 0.3 percent to 105.37 yen. The U.S. dollar was at 80.39 yen after declining yesterday to 80.30, the weakest since Feb. 29.
Spain will sell 12-month and 18-month bills today, followed by auctions of debt due in 2014 and 2022 on April 19.

Spanish Yields
Yields on the nation’s 10-year notes touched 6.16 percent yesterday, the highest since Dec. 1 and edging toward the 7 percent level that pushed Greece, Ireland and Portugal into international rescues. The cost of insuring against a Spanish default rose to the highest on record, according to CMA.
Spanish Prime Minister Mariano Rajoy said his nation must slash its budget deficit in order to maintain access to financing. Failing to reduce the deficit will mean “we won’t be able to fund our debt, we won’t be able to meet our commitments,” he told a conference in Madrid yesterday.
Spain has the euro area’s fourth-biggest economy and the government forecasts it’ll contract 1.7 percent this year as the deepest budget cuts in more than 30 years are implemented. The plan seeks to shrink the deficit to 5.3 percent of gross domestic product this year from 8.5 percent last year.
The implied volatility of three-month options for Group of Seven currencies rose to as high as 10 percent yesterday, according to the JPMorgan G7 Volatility Index. An increase makes investments in currencies with higher benchmark rates less attractive because it shows the risk is greater that market moves will erase profits on such trades.
Currency Volatility
The euro is approaching its support zone of between 104.25 yen and 104 yen, according to Niall O’Connor, a technical analyst in New York at JPMorgan Chase & Co.
“We are wary of a bounce” from those levels, he wrote in a research note yesterday. Support refers to a level where buy orders may be clustered. The 50 percent retracement on the euro’s Fibonacci chart between a January low and a March high was at 104.24 yen, data compiled by Bloomberg show. The euro slid to 104.63 yen yesterday.
The ZEW Center for European Economic Research in Mannheim will probably report today its index of German investor and analyst expectations, which aims to predict economic developments six months in advance, fell to 19 in April from 22.3 in March, according to the median estimate in a Bloomberg News survey. Last month’s figure was the highest reading since June 2010.
“The euro should continue to be constrained by the prospect of soft ZEW survey results today amid already nervous conditions in peripheral bond markets,” Cameron Umetsu, a currency strategist at UBS AG, wrote in a report.
RBA Minutes
The euro has lost 0.1 percent in the past month, according to Bloomberg Correlation Weighted Indexes. The Australian dollar dropped 2.4 percent in the same period, the worst performance among the 10 developed-nation currencies tracked by the gauge.
Minutes released today of the Reserve Bank of Australia’s April 3 meeting, when officials held the benchmark interest rate unchanged at 4.25 percent, reaffirmed that the next rate reduction hinges on an April 24 report on first-quarter inflation. Governor Glenn Stevens said in a statement after this month’s gathering that the board “judged the pace of output growth to be somewhat lower than earlier estimated.”
The so-called Aussie lost 0.3 percent to $1.0322.
China’s yuan advanced after a report yesterday showed U.S. retail sales gained 0.8 percent in March, beating economist forecasts.
Home starts probably increased to a 705,000 annual rate in March following a 698,000 pace the prior month, while industrial production gained 0.3 percent after being little changed in February, according to estimates in separate Bloomberg polls before the figures are released today.
The yuan gained 0.2 percent to 6.3031 per dollar, according to the China Foreign Exchange Trade System.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

S&P 500 Caps First Weekly Drop in 2013 on Stimulus Debate

The Standard & Poor’s 500 Index capped its first weekly decline of the year, after reaching the highest level since October 2007, amid increasing concern the Federal Reserve will curtail its stimulus program. Equities rebounded on the last day of the week as German business confidence rose more than estimated. Freeport-McMoRan Copper & Gold Inc. and U.S. Steel Corp. sank at least 7.3 percent to pace declines in raw-material companies. Abercrombie & Fitch Co. tumbled 8 percent as it forecast a first-quarter loss. Hewlett-Packard Co. (HPQ), the largest personal-computer maker, surged 14 percent after forecasting profit that beat estimates. The S&P 500 slid 0.3 percent for the holiday-shortened week to 1,515.60. The index snapped a seven-week advance, the longest stretch since January 2011. The Dow Jones Industrial Average advanced 18.81 points, or 0.1 percent, to 14,000.57. “When things seem to go in straight lines, it makes me wonder how long the good times can keep rolling,” said Brian Jacobsen, who helps oversee about $217 billion as chief portfolio strategist at Wells Fargo Advantage (EAD) Funds, in Menomonee Falls, Wisconsin. “The Fed didn’t tell us anything we didn’t already know, but sometimes it doesn’t take a lot to push prices around.” Equities fell as several policy makers said the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases, according to minutes of the Fed’s latest meeting. Concern about the debate over the risks and benefits of further quantitative easing helped give the S&P 500 its biggest two-day decline since November during the week. Spending Cuts Next week’s March 1 deadline to avoid automatic U.S. spending cuts may get investors’ attention. It marks another fiscal showdown between President Barack Obama and congressional Republicans. If Congress doesn’t act, federal spending will be reduced by $85 billion in the final seven months of this fiscal year and by $1.2 trillion over the next nine years. The S&P 500 has gained 6.3 percent this year as U.S. lawmakers agreed on a compromise on taxes in January and amid better-than-estimated corporate earnings. About 73 percent of the S&P 500 companies that have released quarterly results beat profit estimates, according to data compiled by Bloomberg. The index trades at 14.97 times reported earnings, below the average since 1954 (SPX) of 16.4. “The support for the market remains,” John Carey, fund manager with Boston-based Pioneer Investment Management, said in a telephone interview. His firm oversees $200 billion. “There’s been a fairly good stream of earnings. There’s certainly nothing to scare anyone.” Biggest Losses Measures of commodity and consumer discretionary companies had the biggest losses in the S&P 500 among 10 industries in the week, slumping at least 1.4 percent. The Morgan Stanley Cyclical Index of companies most-tied to economic growth retreated 1.7 percent, the most since November. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 14 percent to 14.17. The gauge, which had the biggest weekly advance this year, rose after sliding to the lowest level since April 2007 on Feb. 19. Abercrombie (ANF) tumbled 8 percent, the most since August, to $46.86. The retailer said it anticipates a “slight” loss in earnings per share in the first quarter, citing a tough economy and difficulty tied to cold-weather inventory. ‘Very Concerned’ The company is “very concerned around the macroeconomic situation coming into the first quarter,” Chief Executive Officer Michael Jeffries said. Abercrombie will “see a resumption of healthier sales” in the second quarter, he said. Apple Inc. (AAPL) declined 2 percent to $450.81. Foxconn Technology Group, the maker of products including the iPhone, froze hiring across China, fueling concern that the move reflects diminished demand for consumer electronics. Bruce Liu, a spokesman for Taipei-based Foxconn, said the company halted recruitment until the end of March after more workers returned from the Lunar New Year break than a year earlier. Apple has retreated 36 percent from a record high in September, compared with a 3.7 percent gain for the S&P 500. A measure of homebuilders in S&P indexes slumped 6 percent, the biggest decline since September. Toll Brothers Inc., the largest U.S. luxury-home builder, tumbled 6.7 percent to $34.59 after reporting fiscal first-quarter earnings that trailed analyst estimates and projecting narrower margins. Garmin Ltd. (GRMN) sank 11 percent to $35. The biggest maker of navigation devices forecast 2013 sales and profit that missed estimates as consumers switch to smartphones for maps and directions. Missing Estimates VeriFone Systems Inc. plunged 42 percent, the most since November 2008, to $18.92. The maker of credit-card terminals forecast second-quarter profit that missed analysts’ estimates amid weak economic conditions in Europe. Hewlett-Packard added 14 percent, the most since March 2009, to $19.20. The company is using job cuts to bolster profit as demand for printers and personal computers slumps and companies curtail purchases of higher-margin hardware and software. Chief Executive Officer Meg Whitman said she feels “pretty good” about fiscal 2013 and reaffirmed a prediction that the company will resume growth next year, evidence of progress on a five-year turnaround plan even as competitive pressures linger. Google Inc. (GOOG) rose 0.9 percent to $799.71. The operator of the world’s largest Web-search engine surpassed $800 for the first time as mobile computing bolsters growth. More Advertisers The company is benefiting as more advertisers place promotions on its website, buoyed by the growing number of users who access the service on smartphones and tablets. Google grabbed 67 percent of the search market in the U.S. in January, while rivals Yahoo! Inc. (YHOO) and Microsoft Corp. had less than 30 percent combined, according to ComScore Inc. “This is just such a great business, and they so clearly dominate it,” said Martin Pyykkonen, an analyst at Wedge Partners in Greenwood Village, Colorado. “Google has got this knight-in-shining-armor that nobody can kind of penetrate.” Texas Instruments Inc. (TXN) rose 1.8 percent to $34.18. The largest maker of analog chips increased its quarterly dividend by 33 percent and said it added $5 billion to its stock repurchase program. Wal-Mart Stores Inc. (WMT) gained 1.6 percent to $70.40. Fourth- quarter profit topped analysts’ estimates and the company raised its dividend, overshadowing concerns that tax increases would hurt earnings this year. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Leslie Picker in New York at lpicker2@bloomberg.net

what kind of trolley is this?