>>Stocks, Euro, Commodities Drop on Concern Over Greece, China Reserve Rule
By Justin Carrigan
Feb. 12 (Bloomberg) -- U.S. and European equities and commodities fell after China unexpectedly increased bank reserve requirements, while the euro weakened for a third day against the dollar on concern European Union efforts to avoid a default by Greece will undermine the currency region.
The Standard & Poor’s 500 Index retreated 1.4 percent, erasing the week’s advance, and the MSCI World Index slipped 0.9 percent at 9:46 a.m. in New York. The euro slid as much as 1.2 percent against the dollar after European leaders pledged yesterday to take “determined and coordinated action” to support the nation. Oil and copper fell more than 2 percent.
China, the world’s fastest-growing economy, ordered banks to set aside more deposits as reserves for the second time in a month after loan growth accelerated and property prices surged. Pressure is building on European governments to show how they will back up promises to assist Greece with action as investors turn their attention to a meeting of finance ministers in Brussels next week.
“Just as one fire has been put out for now, Greece, the one that originally caused jitters in the markets in mid-January, China, now flares up again,” said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, in a note to clients. “While I understand the market’s response this morning, particularly in commodities, China has no choice but to slow the extraordinary loan growth that has manifested itself in a massive property bubble.”
U.S. Stocks
The S&P 500 erased yesterday’s 1 percent rally. The index has slumped 7.5 percent from a 15-month high on Jan. 19 even as most companies report better-than-estimated fourth-quarter results. More than 350 companies in the S&P 500 have reported earnings since Jan. 11, with about 76 percent topping analysts’ estimates, according to data compiled by Bloomberg.
Sales at U.S. retailers climbed in January for the third time in four months. The 0.5 percent increase was larger than forecast and followed a 0.1 percent drop the prior month that was smaller than previously estimated, Commerce Department figures showed. Purchases excluding autos rose 0.6 percent.
The euro weakened against 12 of its 16 most-traded counterparts, and declines accelerated after an EU report showed the euro region’s gross domestic product grew 0.1 percent in the fourth quarter from the third. The average forecast of economists in a Bloomberg survey was for 0.3 percent expansion.
The Dollar Index, which tracks the U.S. currency against six major trading partners, rose 0.7 percent.
‘Lack of Specifics’
The euro is falling “first on the continuing concern on the lack of specifics on the Greece bailout package, and second on China’s reserve-requirement increase, which hit risk appetite across the board,” Adam Cole, the London-based global head of currency strategy at RBC Capital Markets Inc., wrote in a research report.
Crude oil and copper led the worst decline in commodities in a week as China, the world’s fastest-growing major economy, sought to cool growth. The S&P GSCI Index of 24 raw materials retreated 2 percent to 491.75, the biggest drop since Feb. 5. Oil fell 2.6 percent in New York trading and copper slid 2.9 percent in London. Aluminum, wheat, gold and platinum also declined.
Europe’s Dow Jones Stoxx 600 Index was little changed as the economic reports from the EU and China offset better-than- estimated earnings from ThyssenKrupp AG, Germany’s largest steelmaker, and Eni SpA, Italy’s biggest oil company.
The MSCI Asia Pacific Index gained 0.5 percent. Japan’s Asahi Glass Co. surged 6.9 percent in Tokyo after forecasting in increase in profit. Pacific Metals, the country’s top ferro- nickel producer, and GS Yuasa Corp. gained at least 7.3 percent after boosting their projections.
Credit-default swaps on the Markit iTraxx Crossover Index of 50 mostly high-yield European companies climbed 9.5 basis points to 485.5, according to JPMorgan Chase & Co. prices at 9:22 a.m. in London. Contracts tied to Greek government debt were unchanged at 353.5 basis points, after soaring to a record 428 on Feb. 4, according to CMA DataVision prices.
To contact the reporter on this story: Justin Carrigan in London on jcarrigan@bloomberg.net
Last Updated: February 12, 2010 09:50 EST
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