Commodities rose and US benchmark stock indexes fluctuated near five-year highs, while Treasuries dropped, as the American economy unexpectedly shrank and investors awaited a Federal Reserve policy statement.
Zinc, nickel and silver climbed more than 2.8 per cent to lead gains in 20 of 24 commodities tracked by the S&P GSCI Index as of 1 p.m. in New York. The S&P 500 Index was little changed near the 1,508 level and the Stoxx Europe 600 Index lost 0.6 per cent. Ten-year Treasury note yields increased two basis points to 2.02 per cent, rising for a fifth straight day in the longest stretch of gains since August. The euro strengthened above $US1.35 for the first time since 2011.
US gross domestic product shrank at a 0.1 per cent annual rate last quarter, the worst performance since the world's largest economy was still mired in a recession in 2009, Commerce Department data showed. The median forecast of 83 economists surveyed by Bloomberg called for a 1.1 per cent gain in GDP. The Fed is scheduled to issue a policy statement today.
"What we're really looking for here is a Goldilocks report from the Fed," Burt White, chief investment officer who helps oversee $US247 billion at LPL Financial in Boston, said in a phone interview. "If they come out and think that things are improving faster than what their forecasts were, the markets are going to think that the dovish policies are going to have a short shelf life."
The S&P GSCI Index jumped to the highest level since September. Crude oil in New York was up 0.2 per cent at $US97.72 a barrel. Gold futures rallied 1.1 per cent to $US1,680.50 an ounce after yesterday snapping a four-day slump.
Among US equities, Amazon.com Inc. jumped 5.4 per cent after reporting gains in sales and North American operating margins. Chesapeake Energy Corp. surged 6.5 per cent as Chief Executive Officer Aubrey McClendon announced his retirement. Facebook Inc. rose 1.5 per cent as it prepared to report earnings.
The S&P 500 has risen 5.7 per cent this month through yesterday the best start of a year since 1989, as lawmakers agreed on a budget compromise and companies reported better- than-estimated earnings. The index has more than doubled from a 12-year low in 2009 as the Fed increased its bond purchases to keep interest rates low and spur growth. The S&P 500 is less than 4 per cent below its record of 1,565.15 set in October 2007, while the Dow is less than 2 per cent from its all-time high.
About 75 per cent of the 193 companies in the S&P 500 that released results so far in the quarter exceeded profit projections. Sixty-six per cent have surpassed sales estimates, according to data compiled by Bloomberg.
The disappointing GDP data overshadowed a private report showing companies in the US added 192,000 workers in January, according to ADP Research Institute. The median forecast of 38 economists surveyed by Bloomberg called for an advance of 165,000. Government data in two days is forecast to show employers added 161,000 jobs last month and the unemployment rate remained at 7.8 per cent.
The Fed's latest round of bond buying will reach $US1.14 trillion before it ends the program in the first quarter of 2014, economists forecast in a Bloomberg survey.
The Stoxx 600 retreated as oil-services companies tumbled after Italy's Saipem SpA cut its profit forecast. Saipem lost 34 per cent. Petrofac Ltd. sank 7 per cent in London trading, Technip SA retreated 7.1 per cent in Paris and Subsea 7 SA declined 5.4 per cent in Oslo.
Imperial Tobacco Group Plc sank 4.3 per cent as Europe's second-biggest tobacco company said earnings will drop because of worsening conditions in Europe. Swedbank AB jumped 10 per cent after raising its dividend payout ratio to 75 per cent of profit as fourth-quarter net income more than quadrupled.
Economic confidence in the euro area rose more than forecast in January, adding to signs that the 17-nation currency bloc may be emerging from a recession. An index of executive and consumer sentiment rose to 89.2 from a revised 87.8 in December, the European Commission in Brussels said today. That's the highest since June.
The euro advanced for a second day against the dollar, reaching $US1.3578, the highest level since November 2011. It appreciated to as high as 86.07 British pence, also a 13-month high, before trading at 85.93. Against the yen, Europe's shared currency rose 1 per cent.
The yen weakened 0.4 per cent to 91.08 per dollar, taking its January loss to 5 per cent. That would be a fourth monthly decline, the longest losing streak since 2008. It reached 91.41 yen per dollar today, the weakest level since June 2010.
The yield on Italy's 10-year note rose 15 basis points to 4.32 per cent as government sold 3 billion euros ($US4.1 billion) of 2017 notes and 3.5 billion euros of bonds due in 2022.
The MSCI Emerging Markets Index was little changed, while poised for a third straight monthly gain. The Shanghai Composite Index added 1 per cent, extending its bull market. Taiwan's Taiex index advanced 0.4 per cent as securities regulator said the island will double the limit on mainland Chinese institutions' securities investments. Egyptian stocks jumped 1.5 per cent, rebounding from a one-month low, and Russia's Micex Index slipped 0.4 per cent.
Israeli stocks fell for a second day after Stanley Fischer said yesterday he will step down as central bank chief in June. Poland's WIG20 Index slipped 1.1 per cent as Bank Pekao SA tumbled the most since November 2011 after UniCredit SpA said it was selling as much as 9.1 per cent of its Polish unit to free capital and increase earnings.
Hellenic Telecommunications Organization SA, the Greek phone company known as OTE, is marketing a benchmark issue of five-year junk bonds that will be priced to yield 8 per cent to 8.25 per cent. The notes will be the lowest-rated securities from a peripheral European issuer in at least seven years.
The deal comes as the cost of insuring against default on junk bonds climbed, with the Markit iTraxx Crossover index of credit-default swaps on 50 mostly high-yield companies rising six basis points to 439 basis points.