Stocks fell around the world and industrial metals led commodities lower as the U.S. government shutdown entered a second day and the European Central Bank held a policy meeting. Treasuries rose and the yen strengthened.
The MSCI All-Country World Index dropped 0.2 percent to 383.69 at 10 a.m. in London. Standard & Poor’s 500 Index (SPA) futures slid 0.7 percent. The S&P GSCI (SPGSCI) of 24 commodities lost 0.3 percent as nickel slid 1.1 percent and oil fell 0.5 percent in New York. The 10-year Treasury yield fell three basis points to 2.63 percent and credit-default swaps on U.S. bonds declined for a second day. Japan’s currency climbed against its 16 major counterparts. Italian notes rose for a second day.
Day one of the first shutdown since 1996 ended with no talks scheduled between the White House and Congress, and Treasury Secretary Jacob J. Lew said the U.S. has begun final extraordinary measures to avoid breaching its debt limit. American employers probably stepped up hiring in September economists said before a private report today. The ECB will keep its refinancing rate at 0.5 percent, a Bloomberg survey showed.
“Near-term risk aversion could spark a temporary pullback,” Russ Koesterich, the chief investment strategist at New York-based BlackRock Inc., said in an e-mailed statement. His company manages $3.9 trillion of assets. “The battle over debt ceiling is a more important issue and a more significant potential risk. Investors should expect more volatility in the near term.”
The Stoxx Europe 600 Index fell 0.8 percent for the third decline in four days. Retailers retreated as Tesco Plc, the U.K.’s largest supermarket chain, sank 4.3 percent, the most in almost four months, after first-half earnings declined. Portugal Telecom SGPS SA surged 17 percent as the phone company agreed to combine with Brazil’s Oi SA.
The decline S&P 500 futures signaled U.S. stocks will pare yesterday’s 0.8 percent gain. Data from the ADP Research Institute at 8:15 a.m. New York time may show U.S. companies took on 180,000 workers last month after a gain of 176,000 in August, according to a Bloomberg survey of economists.
The MSCI Emerging Markets Index was little changed. The Philippine Composite Index jumped 2.7 percent after the Asian Development Bank raised its economic growth forecast for the country. Benchmark gauges in Russia, Poland and Turkey fell at least 0.6 percent. Markets in India and China were shut for holidays.
Lead, aluminum, zinc and copper fell at least 0.5 percent as WTI declined to $101.22 a barrel. Gold advanced 0.3 percent to $1,291.97 an ounce, the first gain in three days.
The 10-year Treasury yield was within four basis points of the lowest level since Aug. 12. The yield is down from the high this year of 3.005 percent on Sept. 6 and compares with the average of 3.53 percent over the past decade.
Lew, in a letter addressed to House Speaker John Boehner dated today, repeated that the measures will be exhausted no later than Oct. 17.
Treasury market volatility increased by the most in six weeks yesterday. Price swings as measured by the Merrill Lynch Option Volatility Estimate Index jumped 9 percent as the gauge advanced for a fifth day, the longest run of increases in four weeks. The index was at 87.37, versus the average of 69 for the past year.
The cost of insuring against losses on Treasuries fell, with credit-default swaps linked to U.S. government debt dropping 1.5 basis points to 31.5 basis points. That compares with a peak of 56 basis points in July 2011, when a political standoff threatened to shutter programs and delay bond payments.
The amount of debt protected by default swaps has fallen to $3.4 billion dollars from $5.6 billion two years ago and compares with $13 billion of outstanding insurance on German bunds. There are 886 credit-default swaps contracts linked to U.S debt outstanding, according to the Depository Trust & Clearing Corp. There were 56 trades covering a gross $2.1 billion of Treasuries in the week through Sept. 27, compared with 10 trades the week before.
The yen appreciated for a second day, gaining 0.7 percent to 97.36 per dollar, the strongest level since Aug. 28. It added 0.6 percent to 131.76 per euro. The 17-nation shared currency traded little changed at $1.3533.
New Zealand’s dollar weakened for a second day after a central bank official said the nation’s neutral interest rate has fallen. Documents released under the Official Information Act also showed the Treasury told the government last year there were risks in the Reserve Bank governor being the sole decider on interest rates.
The kiwi dollar slid 0.8 percent to 82.14 U.S. cents after reaching 81.94, the lowest since Sept. 17.
Italy’s 10-year bond yield fell three basis points to 4.39 percent after dropping 15 basis points yesterday.
Chart: WorldWideMarkets Alpha Trader
Chart: WorldWideMarkets Alpha Trader