World equity markets slid and safe-haven US Treasury debt rose as a looming battle in Washington over the government's borrowing limit and a recovery in the yen weakened demand for riskier assets.
Yields on 10-year notes declined three basis points to 1.82 per cent as of 1:39 p.m. in New York. The Standard & Poor's 500 Index was little changed at 1,470 after slipping as much as 0.5 per cent earlier, while the Dow Jones Transportation Average surged to a record. The yen strengthened 1.1 per cent 88.48 per dollar. Platinum jumped almost 2 per cent as Anglo American Platinum Ltd. planned to reduce output, while South Africa's rand slipped against all 16 major peers.
Treasury Secretary Timothy F. Geithner warned yesterday of severe economic hardship should Congress fail to raise the debt ceiling that lawmakers have increased or revised 79 times since 1960, including 49 times under Republican presidents. President Barack Obama vowed he won't negotiate over raising the government's debt ceiling even as he offered to deal on a separate track with the deficit reduction demanded by Republicans.
"The debt-ceiling concern means more uncertainty in play," Tom Wirth, who helps manage $US1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a phone interview. "It's not good for the economy to have a government shutdown. It just feels like August 2011. The Congress is going to take us to the brink once again."
Thirty-year US debt also increased, sending yields down two basis points to 3.01 per cent. So-called extraordinary measures the Obama administration is taking to avoid breaching the federal debt ceiling will work only until mid-February to early March, Geithner said.
Fitch Ratings said its AAA credit rankings on France, the US and the U.K. are likely to come under pressure this year due to slow economic growth and high debt levels.
The three nations, which all have a negative outlook from the company, have seen gross domestic product struggle to recover from the global financial crisis while debt levels have increased amid efforts to spur growth. A failure of US lawmakers to raise the nation's debt ceiling would prompt a "formal review" of its credit rating, Fitch said in a press release today.
Technology shares fell the most among 10 industries in the S&P 500, while consumer-discretionary shares rose the most. Apple Inc. lost 2.6 per cent to $US488.67, trading below $US500 for the first time in 11 months, and was the biggest drag on the benchmark index. The stock slumped for a second day following a Nikkei report that said orders for iPhone 5 parts had been cut about 50 per cent following lower-than-expected sales.
Oracle Corp. dropped 0.7 per cent after rival SAP AG, the biggest maker of business-management software, reported earnings that trailed estimates because of rising spending and slower growth in the Americas.
Dell Inc. climbed rose 2.6 per cent following a 13 per cent jump yesterday after two people with knowledge of the matter said the personal-computer maker is in buyout talks with private-equity firms TPG Capital and Silver Lake. The cost of insuring against default on Dell debt surged.
Retailers in the S&P 500 climbed 0.8 per cent as a group, for the second-biggest gain among 24 industries. Retail sales increased 0.5 per cent in December, Commerce Department figures showed. The median forecast of 83 economists surveyed by Bloomberg called for a 0.2 per cent rise.
Another report showed manufacturing in the New York region contracted in January for the sixth straight month. The Federal Reserve Bank of New York's so-called Empire index was at minus 7.78, compared with the median estimate of economists for a reading of zero.
The yen advanced after reaching 89.67 per dollar yesterday, the weakest level since June 2010. It strengthened 1.3 per cent per euro. Japan Economy Minister Akira Amari warned of harmful effects "if the yen excessively weakens" in Tokyo today.
"The world has gone massively short yen on the idea that Japan is going to be more aggressive with its stimulus under the new prime minister," said Imre Speizer, an Auckland-based strategist at Westpac Banking Corp. "Comments like Amari's are likely to spook those holding yen shorts." A short position is a bet a security will decline in value.
Spain's two-year note yield dropped four basis points to 2.49 per cent after the government sold 5.75 billion euros ($US7.7 billion) of bills, more than the maximum target of 5.5 billion euros. The 10-yield declined one basis point to 5.02 per cent and the rate on similar-maturity Italian bonds rose two basis points to 4.22 per cent.
Among European stocks, SAP, the biggest maker of business- management software, sank 3.9 per cent. ARM Holdings Plc retreated 3.7 per cent from a 12-year high as Morgan Stanley cut its recommendation on the designer of smartphone chips.
Lonmin Plc, the world's third-largest platinum producer, advanced 4 per cent in London trading and Impala Platinum Holdings Ltd., the second-largest producer of the metal, climbed 1.7 per cent in Johannesburg. Burberry Group Plc rallied 4.6 per cent to a four-month high as the U.K.'s biggest luxury-goods company reported revenue that beat estimates.
Platinum for immediate delivery rose as much as 2.7 per cent to $US1,701 an ounce in London, the highest price since Oct. 9. Anglo American Platinum said it will idle four shafts in South Africa, cutting output by 400,000 ounces a year after a review of its operations. Auto catalysts used to reduce harmful exhausts are the biggest use for platinum.
Wheat, nickel and natural gas rose more than 1.4 per cent while gold and silver climbed as 12 of 24 commodities in the S&P GSCI index advanced, while declines in gasoline, oil and lead left the gauge little changed.
The MSCI Emerging Markets Index lost 0.7 per cent as stronger currencies in Asia weighed on exporters and Apple suppliers slid for a second day on concern demand for iPhones is waning. Brazil's Bovespa retreated 0.2 per cent and Russia's Micex Index rose 0.1 per cent
South Korea's Kospi index slid 1.2 per cent as Samsung Electronics Co. declined 2.6 per cent. Hon Hai Precision Industry Co. and Catcher Technology Co. dragged Taiwan's Taiex down 0.8 per cent. The Shanghai Composite Index advanced 0.6 per cent after Citigroup Inc. said earnings have bottomed out.