Most U.S. Stocks Gain With Dollar on Strong Data as Oil Climbs

(Bloomberg) -- Most U.S. stocks rose in light trading, while bonds fluctuated as signs Russia won’t escalate tensions after the downing of its warplane saw investors to shift their attention to evidence the American economy is robust enough to withstand higher interest rates.

The Russell 2000 Index of small-cap equities led gains, while the Standard & Poor’s 500 Index meandered amid below- average volumes ahead of Thursday’s Thanksgiving holiday in the U.S. The dollar strengthened as orders data added to the picture of a stabilization in manufacturing, even as consumer spending climbed less than was forecast. The euro slipped to a seven- month low on bets regional policy makers will bolster stimulus, while crude oil rose above $43 a barrel. Brazilian assets tumbled as a graft scandal widened.

U.S. and German leaders called for an easing of tensions a day after Turkey’s downing of the Russian jet threatened to escalate the conflict in Syria, unsettling financial markets. In the U.S., the biggest part of the economy is off to a slow start to the holiday season, adding an element of doubt as to the strength of the economic recovery even as goods orders pick up. Speculation is mounting that the Federal Reserve will boost interest rates before the year is out, just as the European Central Bank increases stimulus.

“Consumers are in pretty good shape, but continue to be relatively conservative in how they’re spending money,” said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management, which oversees $27 billion. “It’s a typical mixed bag of economic news. It will be a light trading day.”

Stocks

The S&P 500 fell less than 0.1 percent to 2,088.87 as of 4 p.m. in New York, capping its third straight move of less than 0.2 percent following its best weekly advance this year. Trading in S&P 500 stocks was 31 percent below the 30-day average. The Russell 200 jumped 0.8 percent to its highest level since Nov. 6.

Energy shares trimmed earlier declines after U.S. government data showed crude-oil stockpiles rose less than analysts forecast. Pfizer Inc. climbed 2.8 percent to lead health-care companies’ advance. Macy’s Inc. gained 1.9 percent and travel-related companies rebounded to pace an increase among consumer discretionary companies.

The Stoxx Europe 600 Index rose 1.4 percent, as travel and leisure stocks rebounded from the biggest drop since September. Abengoa SA’s bonds and stock tumbled to records after the embattled renewable-energy company said it was seeking preliminary protection from creditors. Banco Santander SA, Spain’s largest bank, and Banco Popular Espanol SA, the sixth- biggest, dropped more than 2 percent.

The MSCI Asia Pacific Index slipped 0.5 percent Wednesday, led by losses in Japan and Australia.

Bonds

Yields on the benchmark U.S. 10-year note fell one basis point, or 0.01 percentage point, to 2.23 percent. The yield touched 2.2 percent Tuesday, the lowest level since Nov. 4. U.S. bond markets are shut Thursday for the holiday and open for a partial session Nov. 27.

The yield difference between two- and 10-year Treasuries shrank to the narrowest since February amid lackluster inflation and as bets on a December rate hike from the Fed hold above 70 percent.

Euro-area government bonds advanced on bets economic stimulus will be expanded before the year is out. ECB Vice President Vitor Constancio fueled that speculation, saying risks to the euro-area economy are to the downside in a Bloomberg TV interview Wednesday.

Germany’s two-year note yields slipped to a record alongside those of peers including Spain and Belgium. Yields were negative on German bonds with maturities out as far as seven years on Wednesday.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, rose 0.1 percent following a 0.3 percent retreat last session. The euro fell 0.2 percent to $1.0619, nearing the $1.0458 level reached on March 16, its weakest since January 2003. The currency dropped 0.1 percent to 130.32 yen on Wednesday.

Central bank policy makers including ECB President Mario Draghi have said they will do whatever is required to ward off deflation before their Dec. 3 meeting. Any move by the Fed to raise rates in December would dim the allure of the 19-nation currency versus the greenback.

Emerging Markets

The Ibovespa stock gauge sank 2.9 percent, the most since Oct. 13, while the Brazilian currency dropped 1.2 percent, the most among 16 major currencies tracked by Bloomberg. Billionaire Andre Esteves, who transformed Grupo BTG Pactual into the largest independent investment bank in the region, was detained Wednesday, sending shares of the lender down a record 21 percent. Delcidio Amaral, the leader of the government coalition in the Senate, was also held.

Brazil’s equity market has lost about a third of its value since March 2014, when a widening probe into a pay-to-play scheme between an alleged cartel of builders and state-run oil producer Petroleo Brasileiro SA left President Dilma Rousseff fighting for her political survival. The lack of support from Congress had the government struggling to approve measures that could shore up the nation’s finances, seeing Brazil ousted from a group of investment-grade countries in September.

Bank Itau Unibanco Holding SA and Petrobras led Ibovespa losses, while Brazil’s $4.3 billion in bonds due 2025 fell the most in three weeks.

Russia’s ruble declined for the third time in four days and Turkey’s lira dropped to a two-week low as Russia ratcheted up criticism of Turkey for shooting down the warplane on Tuesday. Chinese shares rallied amid speculation state intervention to stabilize the market is working, with the Shanghai Composite Index up 0.9 percent amid losses throughout the region.

Commodities

West Texas Intermediate crude climbed 0.4 percent to $43.04 a barrel after earlier retreating back below $42. Crude had gained more than 6 percent over the previous two trading sessions. The U.S. report showed that crude, gasoline and distillate fuel stockpiles increased last week.

Gold fell to near a five-year low as investors focused on data showing an increase in U.S. orders for business equipment and a drop in jobless claims, boosting speculation over the Fed’s action on rates. Higher borrowing costs damp the metal’s appeal as a store of value.

Copper, zinc and aluminum traded near their lowest levels in six years, and nickel has slumped this week to the least in more than a decade. Iron ore has taken a fresh beating, with prices sinking to the lowest level in six years as output cuts at Chinese mills hurt demand while low-cost supplies from the biggest miners expand.

--With assistance from Anna-Louise Jackson, Emma O'Brien, Victoria Stilwell, Andrea Wong, Ranjeetha Pakiam, Joe Deaux, Denyse Godoy and Maria Levitov.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jeremy Herron in New York at jherron8@bloomberg.net To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net Jeremy Herron, Emma O'Brien