4:00 PM New York – U.S. stocks traded higher after service industry expanded at a faster pace in May and G7 leaders failed to agree on specific steps to arrest widening financial contagion in the euro zone. Spanish bonds spread traded above 5% to German bunds. Commodities were under pressure.
Traders on Wall Street quickly shifted focus away from the U.S. Treasury statement on G7 talks that pledged to work together in tackling the euro zone crisis after it failed to detail specific steps.
The central bankers and finance ministers discussed the progress towards the “financial and fiscal union” but the statement did not clarify if there was a consensus emerging in talks. Japanese finance ministers urged European leaders to do more in tackling the crisis as strong yen hurt Japanese exports according to his comments after the meeting with reporters in Tokyo.
The G-7 did not release a statement after the talks held today.
Investors have come to expect little of these high profile meetings as more than once in the last four years the hopes of quick solution have been dashed with little follow up actions.
The leaders are expected to meet once again at a summit of G20 nations in Mexico on June 18 and 19 and European Union leaders are expected to convene again at the end of the month. The results of the second parliamentary election on June 17 in Greece may set the stage for later talks.
The latest private survey of service industry in the U.S. indicated an expansion in May. The unexpected rise in the index also helped broader market indexes to stay in the positive zone in New York.
On the earnings front, Dollar General first quarter net surged 36% to $213.4 million and lifted outlook and G-III Apparel reported first quarter net loss widened to 53%. United Natural Foods third quarter net soared 24% to $29 million and update fiscal guidance.
European markets traded. Spain regained market focus after Treasury minister warned that rising bond yields will effectively shut Spain from credit markets.
The risk premium demanded by bond market for Spanish bond to German bunds is above 5% and Treasury Minister Montoro said in a radio interview, “the risk premium says Spain doesn’t have the market door open.” Spain is set to sell long term bonds on Thursday and is expected to raise as much as 2 billion euros.
The euro traded lower as German orders fell 1.9% in April and retail sales across the euro zone declined 1% in the month from March and dropped 2.5% from a year ago.
Stocks in Tokyo rebounded in weak trading ahead of a meeting of G7 finance ministers. Fast Retailing Co plunged 9% after it reported May same store sales plunged 10%. Two card board products makers, Rengo and Tomoku dropped after regulators launch price fixing investigation in the industry.
Australian stocks rebounded after the Reserve Bank of Australia lowered cash rate by 25 basis points in a preemptive move as financial markets sentiment deteriorated in the last eight weeks. Qantas plunged 18% after it estimated its full year net profit to plunge 91% from a year ago.
Commodities, Bonds and Currencies
The yields on 10-year U.S. bond edged higher from a multi-decade low to 1.55% and 30-year U.S. bond edged up to 2.62%.
The U.S. dollar edged down 0.5% to $1.243 to one euro and gained against the Japanese yen to 78.74 in New York trading.
Immediate delivery futures of Texas crude oil increased 9 cents to $84.07 a barrel and Brent crude futures rose 8 cents to $98.93. Futures of natural gas increased 0.04 cents to $2.45 per mbtu and gasoline price increased 1.6 cents to 268.7cents a gallon.
In metals trading, copper decreased 1.05 cents to $3.29 per pound, gold increased $5.00 to $1,618.90 per ounce and silver rose 47 cents to $28.48.