GLOBAL MARKETS-Stocks falter on Spain, U.S. data; bonds gain

Thu Apr 19, 2012 12:16pm EDT

* Stocks ease after tepid U.S. economic data; Treasuries rise

* Oil futures gain on initial reaction to Spain's debt sale

By Herbert Lash

NEW YORK, April 19 (Reuters) - Global stocks traded near break-even and government debt prices rose o n T hursday despite solid demand for Spanish bonds as investors remained skeptical about the country's fiscal outlook and softer-than-expected U.S. economic data damped sentiment.

The number of Americans claiming unemployment benefits for the first time fell only slightly last week, while factory activity in the Mid-Atlantic region slowed sharply this month and U.S. home resales fell for a second month in March.

Analysts said part of the data's weakness was payback after an abnormally warm U.S. winter. But there was little doubt the economy was losing some steam, leaving the door open for further monetary stimulus from the Federal Reserve, a bullish sign for bonds.

The benchmark 10-year U.S. Treasury note was up 4/32, the yield at 1.9612 percent.

"The prospects for easing are on the table and are always going to be on the table," said Sean Incremona, economist at 4CAST LTD in New York. "Euro zone worries, U.S. economy worries -- it doesn't look like it's going to be a risk-on day."

The Dow Jones industrial average was down 28.42 points, or 0.22 percent, at 13,004.33. The Standard & Poor's 500 Index was down 3.11 points, or 0.22 percent, at 1,382.03. The Nasdaq Composite Index was up 12.32 points, or 0.41 percent, at 3,043.77.

Spain sold 2.5 billion euros in two- and 10-year bonds, at the top end of the targeted amount. Yields on the key 10-year bond were higher, however, reflecting fears that Spain may miss budget deficit targets, as well as concerns about its banking sector.

Investors fretted about the higher yields demanded in the auction and about a possible future credit rating downgrade for France, where upcoming presidential elections pose an additional risk.

Global stocks as measured by MSCI's all-country world equity index fell 0.3 percent to 325.37.

The FTSEurofirst 300 closed down 0.5 percent at 1,040.79. Euro zone debt concerns sent the French CAC down 2 percent and the Spanish IBEX off 2.2 percent against a broadly flat British FTSE.

Italian, Spanish and French bond yield spreads widened over benchmark German Bunds. Bund futures traded 30 ticks higher on the day at 140.66, after hitting a record high of 140.78 earlier.

"There are elections coming up in France, Spain has to nail down its fiscal trajectory and Greece is in the melting-pot," said John Haynes, head of research at Investec Wealth & Investment.

"The outlook for European equities is pretty good at these valuation levels if you are an investor rather than a trader. In two years-plus you will probably make a lot of money out of European equities. But... in the short term it is difficult to see where the positive news will come from."

The euro initially tracked a rise in credit default swaps and a widening of yield spreads between safe-haven German bunds and debt issued by weaker countries like Spain and Italy.

But the euro rebounded after early declines, gaining 0.1 percent to $1.3136. The dollar was down against a basket of major trading-partner currencies, with the U.S. Dollar Index flat at 79.535.

New claims for unemployment benefits in the United States fell last week, but from an upwardly revised number a week earlier, the U.S. government said on Th ursday. New claims totaled 386,000, above the Reuters consensus forecast of 370,000.

U.S. Treasuries' prices rose on the higher-than-forecast jobless claims, which appeared to fortify prospects for accommodative monetary policy in the months ahead.

The benchmark 10-year note rose 6/32 on the news, its yield easing to 1.95 percent.

Crude oil bounced off a two-month low set the previous session after the Spanish bond auction. Brent June crude gained 39 cents to $118.36 a barrel.

U.S. May crude rose 17 cents to $102.84 a barrel.

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