BL: Stocks Drop on Concern Over European Debt; Dollar Falls, Commodities Gain
By Stuart Wallace
Feb. 8 (Bloomberg) -- Stocks fell amid concern that some European governments will struggle to fund budget deficits, while industrial metals rallied from last week’s rout and currencies of commodity producers gained.
The Dow Jones Industrial Average fell below 10,000 for a third straight day as Bank of America Corp. dropped 2.9 percent at 2:36 p.m. in New York. The Athens Stock Exchange General Index lost 3.9 percent and the MSCI Emerging Markets Index slipped 0.4 percent. The two-year Greek government bond yield climbed 24 basis points to 6.63 percent. The S&P GSCI Index of 24 commodities rose 1.1 percent, the first gain in four days. South Africa’s rand advanced against its 16 most-traded peers.
Greece needs outside help as it tackles the European Union’s largest budget shortfall, said Mohamed A. El-Erian, co- chief investment officer at Pacific Investment Management Co. French Finance Minister Christine Lagarde said at a Group of Seven meeting that Greece’s budget deficit will be “managed.”
“We’re already facing contagion,” Arnab Das, managing director of market research and strategy at Roubini Global Economics in London, said in an interview on Bloomberg Television. “It could go a lot further unless the rot is stopped.”
Losses in U.S. stocks were limited as Google Inc., Home Depot Inc. and Amazon.com Inc. advanced following analyst upgrades. Financials posted the biggest decline among the 10 main industries, losing 1.2 percent as a group. The S&P 500 has posted four consecutive weekly declines, the longest losing streak since July, amid growing concern over sovereign debt and China’s moves to slow lending.
Europe Rebounds
European stocks rebounded from the biggest weekly drop in 11 months as investors snapped up food and mining companies and a technical indicator showed equities may have fallen too far. The Dow Jones Stoxx 600 Index added 0.6 percent after its earlier intraday decline pushed the regional benchmark to an “oversold” level for the first time in 11 months, according to the so-called Relative Strength Index.
The MSCI World Index of 23 developed nations’ stocks declined as much as 0.6 percent. Stocks in Asia fell for a third day. Russia’s Micex index lost 2.5 percent.
Copper for delivery in three months rose 1.8 percent to $2.9085 a pound in New York, rebounding from a four-week slump. Aluminum, nickel and zinc also gained. Crude oil added 1 percent to $71.89 a barrel in New York. Gold for April delivery advanced 1.4 percent to $1,067.30 an ounce. March wheat rallied 2.5 percent to $4.85 a bushel in Chicago trading.
Rand, Pound
The rand strengthened 0.9 percent versus the yen and the dollar, and 0.8 percent compared with the euro. The European common currency snapped three days of declines against the dollar, gaining as much as 0.3 percent. The pound declined versus 12 of 16 of its most-traded counterparts as opinion polls suggested a growing chance no party will win a majority in elections that must be held by June.
Greece is trying to persuade investors it can restrain the budget shortfall without outside assistance, while borrowing costs are also climbing for Portugal and Spain.
A gauge of corporate credit risk climbed to the highest in more than two months amid investor concern that “contagion” from risks posed by rising deficits in Europe to government debt could spread to other assets.
Credit-default swaps on the Markit CDX North America Investment-Grade Index Series 13, which is linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, rose 1.75 basis point to a mid-price of 103.5 basis points as of 12:04 p.m. in New York, according to broker Phoenix Partners Group. The index is at its highest since 106.24 basis points on Nov. 30, according to CMA DataVision prices. The gauge typically rises as investor confidence deteriorates.
Credit-default swaps on Portugal, where politicians are trying to push through increases in spending, climbed 17 basis points to an all-time high of 244, CMA DataVision prices show. Contracts on Greece rose 21 basis points to 428, matching the record set last week.
To contact the reporters for this story: Stuart Wallace in London at swallace6@bloomberg.net
Last Updated: February 8, 2010 14:39 EST
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