Stocks rise, dollar weakens after U.S. shutdown; Treasuries fall

STOCKS ROSE TUESDAY and Treasuries fell following the Congressional stalemate that sent the federal government into shutdown. A Bloomberg analysis of the S&P 500 following government shutdowns since 1976 suggests the shutdown may be a buying opportunity for stock investors. / BLOOMBERG NEWS FILE PHOTO/JIM LEE
STOCKS ROSE TUESDAY and Treasuries fell following the Congressional stalemate that sent the federal government into shutdown. A Bloomberg analysis of the S&P 500 following government shutdowns since 1976 suggests the shutdown may be a buying opportunity for stock investors. / BLOOMBERG NEWS FILE PHOTO/JIM LEE

LONDON – Global stocks rebounded after the biggest decline in a month and Treasuries fell on speculation any economic effect from the U.S. government shutdown will be limited and already reflected in markets. The dollar weakened.

The MSCI All-Country World Index climbed 0.1 percent to 382.62 at 9:30 a.m. in New York. The Standard & Poor’s 500 Index advanced less than 0.1 percent after the benchmark index retreated 2.6 percent from its last record on Sept. 18. Treasury 10-year yields rose 1.3 basis points to 2.62 percent. Australia’s dollar strengthened against most major peers after the central bank left borrowing costs unchanged. The Bloomberg U.S. Dollar Index dropped 0.2 percent, crude oil retreated and corporate bond risk fell for the first time in five days.

Congress’s failure to pass a budget closed the government for the first time in 17 years, setting the stage for a debate on raising the U.S. debt ceiling within three weeks. The Bank of Japan’s Tankan survey on business confidence rose to the highest level in almost six years. A report on U.S. manufacturing today may show growth and factory output in the 17-nation euro area expanded for a third month.

“The news of a partial Federal shutdown has been received pretty calmly,” Kit Juckes, global strategist at Societe Generale SA in London, said in a note to clients. “The dollar will be weakened by the shutdown but will probably snap back sharply once it ends, as long as that doesn’t take more than a couple of weeks.”

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U.S. shutdown

The partial shutdown will put as many as 800,000 federal employees out of work today, halting some government services after Congress failed to break a partisan deadlock. The Senate earlier voted 54-46 against a House funding bill linked to changes in President Barack Obama’s health-care legislation.

The standoff that may be a buying opportunity for stock investors, if history is any guide. The S&P 500 has risen 11 percent on average in the 12 months following a government shutdown, according to data compiled by Bloomberg on instances since 1976. That compares with an average return of 9 percent over 12 months. In all the cases, the U.S. equity benchmark was higher by the end of the next two years.

The gain in S&P 500 futures signaled the U.S. equity benchmark may rebound after falling in seven of the previous eight sessions and closing at the lowest level since Sept. 9 yesterday. The benchmark gauge rose 4.7 percent last quarter and closed at a record of 1,725.52 on Sept. 18. The MSCI gauge of global shares dropped 0.8 percent yesterday, the most since Aug. 27, to trim its quarterly gain to 7.4 percent.

European markets

The Stoxx Europe 600 Index rose 0.1 percent after falling to the lowest level in almost three weeks yesterday. Telecom Italia SpA advanced 4.8 percent after surging 5.2 percent yesterday amid speculation CEO Franco Bernabe will resign. Goldman Sachs Group Inc. reinstated coverage of the phone company with a buy recommendation. Unilever slid 3.6 percent after the second-largest consumer-goods maker said sales growth slowed in the last quarter.

Confidence among large manufacturers rose to the highest level since the early stages of the global credit crisis in 2007, with the quarterly Tankan index for big manufacturers rising to 12 in September from 4 in June, the BOJ said today. Euro-area manufacturing was 51.1 in September compared with 51.4 in August, London-based Market Economics said today. A reading above 50 indicates growth.

ISM watch

The U.S. factory index report by the Institute for Supply Management Inc. was probably at 55 in September, based on the survey median, after the prior month’s reading of 55.7, which was the strongest since June 2011. The report is due at 10 a.m. in New York.

The dollar fell to the weakest level in 19 months against the Swiss franc, reaching 89.93 centimes. The U.S. currency dropped 0.2 percent to $1.3559 per euro after sliding to $1.3588, the weakest since Feb. 6. The pound erased this year’s 8.9 percent decline against the greenback and the yen strengthened 0.3 percent to 97.91 per dollar.

The Aussie surged 0.8 percent to 93.95 U.S. cents. Sweden’s krona jumped as a report showed manufacturing expanded at the fastest pace in more than two years.

Spain’s 10-year bond yield fell seven basis points to 4.23 percent and Portugal’s dropped 10 basis points to 6.58 percent.

Debt markets

The cost of insuring against losses on corporate bonds dropped after four days of increases. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies declined 1.3 basis points to 102.6 basis points.

Companies sold 20 percent fewer bonds denominated in euros and pounds last quarter compared with the same three months of 2012, data compiled by Bloomberg show. Issuance fell to 171.5 billion euros ($233 billion) in the period, with year-to-date sales at the lowest since 2002.

China’s Purchasing Managers’ Index came in at 51.1 for September, compared with 51 in August and the 51.6 median estimate in a Bloomberg News survey.

The S&P GSCI gauge of 24 commodities declined 0.6 percent, the third consecutive drop, as lead fell 2.2 percent and gasoline slipped 1.2 percent. West Texas Intermediate oil was down 0.6 percent at $101.73 a barrel after losing 0.5 percent yesterday.

The MSCI Emerging Markets Index rose 0.6 percent, increasing for the first time in six days after capping its first quarterly gain this year.

The Borsa Istanbul National 100 Index climbed 2 percent, the biggest gain in emerging markets, and Turkey’s two-year benchmark notes snapped six days of losses while the lira strengthened. The nation’s manufacturing PMI rose to 54 last month from 50.9 in August, according to data from HSBC Holdings Plc and Markit Economics today.

Indonesia’s JCI Index added 0.7 percent after the country reported an unexpected trade surplus in August, compared with the forecast $810 million deficit in a Bloomberg survey.

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