… Bond Risk Declines

DUBAI – Iran agreed yesterday to curtail its nuclear activities in return for easing of some sanctions on oil, auto parts, gold and precious metals. Photographer: Behrouz Mehri/AFP via Getty Images
Oil and gold fell while stocks climbed to the highest level since 2008 after Iran and world powers reached an initial deal on the nation’s nuclear program. Bond risk declined and the yen weakened to a six-month low.

Brent crude tumbled 1.8 percent to $109.06 a barrel at 10:45 a.m. in London, heading for the biggest decline in three weeks. Gasoline and heating oil slumped at least 1.6 percent. Gold fell as much as 1.5 percent to a four-month low. The MSCI All-Country index of stocks advanced 0.2 percent and futures on the S&P 500 Index (SPX), which capped a seventh weekly gain Nov. 22, rose 0.3 percent. Japan’s currency slid 0.5 percent against the dollar. Corporate bond risk fell to the lowest in more than 3 1/2 years.

Iran agreed yesterday to curtail nuclear activities in return for easing of some sanctions on oil, auto parts, gold and precious metals, an accord that broke a decade-long deadlock. The deal, which releases some of Iran’s oil assets, spurred a rally in airlines, while Valeo SA and Continental AG led car-parts makers higher. U.S. pending home sales probably rebounded in October, economists said before a report today.

“Some of the risk premium has been taken out because of the Iran deal,” Henk Potts, who helps oversee about $310 billion as a strategist at Barclays Wealth & Investment Management in London, said by phone today. “Sanctions have been hitting Iran oil dramatically. There is hope that in the long term the supply dynamics will improve. High commodity prices are one of the key costs to businesses and consumers so a decline in oil equates to lightening up the tax burden.”

Brent slid from a six-week high to the lowest since Nov. 21. West Texas Intermediate oil dropped 1.5 percent to $93.46 a barrel. Heating oil declined 1.6 percent to $2.9936 a gallon, while gasoline fell 1.7 percent to $2.6789 a gallon.

Gold Slides

Gold dropped to as low as $1,225.55 an ounce following last week’s 3.6 percent decline, the steepest weekly slump since September. Silver slid 0.6 percent and reached the lowest price since Aug. 8.

The Stoxx Europe 600 Index climbed 0.5 percent as almost four shares advanced for every one that declined. Air France-KLM (AF) Group, Europe’s biggest airline, advanced 1.2 percent. Deutsche Lufthansa AG, the second-largest in the region, increased 1.5 percent. Thomas Cook Group Plc rose 2.6 percent. Continental, Europe’s second-largest auto-parts maker, gained 1.7 percent. Valeo, France’s second-biggest maker of car parts, rose 1.5 percent.

PSA Peugeot Citroen gained 3.9 percent after people familiar with the matter said its chief executive officer plans to step down next year. Europe’s second-largest carmaker is also likely to benefit from the Iran accord as the country was Peugeot’s biggest market after France prior to the trade sanctions.

Medicare Payments

Fresenius Medical Care AG climbed 8.3 percent after U.S. regulators scrapped a plan to cut Medicare payments next year. Fresenius SE, which holds 31 percent of Fresenius Medical Care, rallied 4.1 percent.

The S&P 500 jumped 27 percent this year and ended last week at 1,804.76, its highest level ever.

A report later today may show that pending home sales in the U.S. increased 1.1 percent in October, following a 5.6 percent drop a month earlier, according to the median of 34 estimates in a Bloomberg survey of economists.

The MSCI Emerging Markets Index rose for a second day, adding 0.5 percent. Benchmark gauges in India and Turkey climbed more than 1.5 percent. The Turkish lira and Indian rupee strengthened at least 0.4 percent against the dollar, while Russia’s ruble weakened 0.4 percent.

The Shanghai Composite Index slipped 0.5 percent, led by energy producers, after an explosion at a China Petroleum & Chemical Corp. pipeline and crude oil fell. China Petroleum, also known as Sinopec, slumped 4 percent, the most in five months.

Protests Escalate

Thailand’s SET index fell 0.5 percent and the baht slid 0.5 percent to a 10-week low. Anti-government protests spread to military bases, government offices and television stations today after more than 100,000 people joined rallies yesterday against Prime Minister Yingluck Shinawatra.

The yen slid as much as 0.7 percent to 101.92 per dollar and a four-year low of 137.99 per euro as demand for the safety of Japan’s currency waned.

The euro weakened 0.4 percent to $1.3510, extending declines after European Central Bank Governing Council member Ardo Hansson said the bank stands ready to cut borrowing costs further and is technically prepared to make its deposit rate negative.

Oil Producers

The Norwegian krone slid 0.7 percent to 6.1031 per dollar and the Canadian dollar depreciated 0.4 percent to C$1.0560 per U.S. dollar as currencies of oil-producing nations declined.

German government bonds rose, pushing 10-year yields two basis points lower to 1.73 percent. The rate on 10-year Treasury notes was little changed at 2.75 percent. Spain’s 10-year yield climbed three basis points to 4.13 percent.

The cost of insuring against losses on corporate bonds fell, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies decreasing 1.5 basis points to 78 basis points, the lowest since April 2010. The Markit iTraxx Crossover Index of contracts on 50 high-yield companies declined 4.7 to 324, the lowest since October 2007.

– BLOOMBERG