* U.S. Midwest business activity contracts in April; US
dollar falls
* Fall in euro zone inflation adds to ECB rate cut case
* Apple announces largest non-bank bond deal in history
By Caroline Valetkevitch
NEW YORK, April 30 (Reuters) – Stocks on major markets edged
higher on Tuesday while the U.S. dollar fell to a two-month low
on expectations of further supportive actions by U.S. and
European central banks.
Investors await the release of the Federal Reserve’s policy
statement on Wednesday as well as the European Central Bank’s
announcement on Thursday. Investors believe the Fed will
continue with its bond buying program in response to recent
weaker U.S. economic data, while the European Central Bank may
cut its benchmark interest rate.
Apple wowed debt markets with the largest non-bank
bond deal in history, offering $17 billion for sale. U.S.
Treasuries erased early gains ahead of the debt sale, while
shares of the tech company shot up 3.2 percent to $443.75.
The S&P; 500 was slightly higher after data showing an
unexpected contraction in business activity in the U.S. Midwest
was offset by a report showing U.S. home prices rose in February
at their fastest rate in almost seven years.
At the same time, the U.S. dollar was being driven by views
on the Fed as investors watch to see if the sluggish economic
recovery and slowing inflation might not only end talk of
slowing the Fed’s bond-buying, but also push the Fed into buying
more assets.
Weakness in the dollar “is mainly speculation on further Fed
quantitative easing policy,” said Ulrich Leuchtmann, head of FX
research at Commerzbank. “The view that the Fed would scale down
QE is coming more and more under question due to poor U.S.
data.”
The dollar index, which measures its value against a
basket of six major currencies, hit its lowest since the end of
February at 81.598. It was last down 0.4 percent at 81.785.
The euro rose as high as $1.3185, the strongest since
April 17.
On Wall Street on Tuesday, the Dow Jones industrial average
was down 7.27 points, or 0.05 percent, at 14,811.48. The
Standard & Poor’s 500 Index was up 0.46 points, or 0.03
percent, at 1,594.07. The Nasdaq Composite Index was up
14.05 points, or 0.42 percent, at 3,321.07.
U.S. stocks have mostly rallied since the start of the year,
and the S&P; 500 closed at a record high on Monday.
MSCI’s world equity index was up 0.4
percent, while the pan-European FTSEurofirst 300 index
ended down 0.2 percent. Earlier, MSCI’s broadest index of
Asia-Pacific shares outside Japan rose 1.1
percent to a seven-month high.
APPLE COMES TO DEBT MARKET
Just a week after announcing its first drop in quarterly
earnings in a decade, Apple offered the massive deal to raise
funds for an ambitious program that will return $100 billion in
cash to holders of Apple shares.
Sources said investors could barely submit orders fast
enough to get in on the deal from Apple, the only major tech
company without a single penny of debt on its books.
The $17 billion size easily trumps the previous biggest
single deal according to Thomson Reuters/IFR data, a $14.7
billion deal from Abbott Laboratories spin-off AbbVie last
November.
In the U.S. Treasury market, the benchmark 10-year U.S.
Treasury note was last down 1/32, with the yield at 1.6717
percent.
But participants said Treasury yields were likely to stay
low and that the yield curve would tend to flatten, narrowing
the difference between short- and long-term yields.
“Greater economic weakness out of Europe with higher levels
of unemployment and ebbing inflation – that theme is starting to
gain greater momentum,” said Wilmer Stith, co-portfolio manager
of the Wilmington Broad Market Bond Fund in Baltimore, Maryland.
EUROPEAN DATA WEAK; US DATA MIXED
In the United States, the S&P;/Case-Shiller index of 20
metropolitan areas showed single-family home prices rose 9.3
percent in February from a year earlier, the fastest pace since
May 2006, which was seen as another sign of the housing market
recovery.
Another U.S. report showed consumer confidence rebounded in
April as Americans felt better about the outlook for the economy
and their income prospects. Both helped offset news that the
Institute for Supply Management-Chicago business barometer fell
to 49, below the 50 mark that denotes contraction.
Data out of Europe on Tuesday bolstered views the ECB will
cut interest rates when it meets on Thursday.
Inflation in the euro zone hit a three-year low and
unemployment rose to a record high, the EU statistics office
reported. Adding to worries, German retail sales unexpectedly
fell in March while Spain’s economy shrank for the seventh
straight quarter in the first three months of the year.
“It’s looking more and more likely that the European Central
Bank will indeed cut its main refinancing rate on Thursday while
the Federal Reserve will stand pat on Wednesday,” said Brian J.
Jacobsen, chief portfolio strategist at Wells Fargo Funds
Management in Menomonee Falls, Wisconsin.
A cut in the ECB benchmark rate by 25 basis points to a
record low of 0.5 percent after its policy meeting on Thursday
has been largely factored in by financial markets, though many
analysts and dealers still harbor some doubts it will happen.
In the commodity markets the growth concerns, heightened by
the recent run of weak economic data around the world, largely
outweighed the hopes of further central bank support.
Brent crude dropped $1.61 to $102.20 a barrel. U.S.
crude was $1.14 lower at $93.36 a barrel.
Gold fell as investors remained on the sidelines ahead of
central banks meetings. Gold was down 0.4 percent at
$1,469.64, after gaining nearly 1 percent on Monday.
