GM! Stocks, Euro Tumble on Concern Debt Crisis Will Hurt Economy; Gold Surges
By Stuart Wallace
May 14 (Bloomberg) -- Stocks fell around the world on concern that Europe’s debt crisis will limit growth and earnings. The euro fell below $1.25, oil retreated for a fourth day and bunds rallied.
The Stoxx Europe 600 Index slumped 1.8 percent at 10:36 a.m. in London and the MSCI Asia Pacific Index fell 1.1 percent. Futures on the Standard & Poor’s 500 Index declined 0.8 percent. Crude oil retreated 2 percent and copper dropped 2.4 percent as the euro weakened against the dollar to levels not seen since March 2009. German bonds climbed, sending the yield on the 10- year bund down 4 basis points. The cost of insuring against a default by Greece rose.
The foundations for a worldwide recovery aren’t “solid” and the sovereign-debt crisis is “deepening,” Chinese Premier Wen Jiabao said last night. Deutsche Bank AG Chief Executive Officer Josef Ackermann said Greece may not be able to repay its debt in full and former Federal Reserve Chairman Paul Volcker said he’s concerned the euro area may break up. Sony Corp., the world’s second-largest maker of consumer electronics, said it may suffer a “significant impact” if Europe’s deficit spreads.
“Euro-phoria has faded fast,” Ian Williams, U.K. strategist at Altium Securities in London, wrote in a note. “The symptoms of the region’s problems had to be addressed quickly, but the causes are very deep-seated, and through the week growing acknowledgement of the inevitable impact of austerity packages on the outlook for growth has driven the euro lower.”
Stocks Pare Advance
The Stoxx 600 pared its weekly advance to 6.8 percent, still the biggest gain since July. The gauge rallied 7.2 percent on May 10 after the European Union unveiled a 750 billion-euro ($938 billion) financial assistance package for indebted countries.
Banks led declines among the 19 industry groups in the Stoxx 600 today as Credit Suisse Group AG forecast new regulation may cost the industry 244 billion euros. Banco Santander SA, Spain’s biggest lender, tumbled 5.1 percent in Madrid. Barclays Plc fell 3.1 percent in London. Saras SpA declined 3.5 percent in Milan after the Italian oil refiner swung to loss in the first quarter.
The yield on the bund fell to 2.89 percent, and the two- year German note yield declined two basis points to 0.58 percent. Greek 10-year bonds dropped, with the yield climbing eight basis points to 7.65 percent. The euro slipped 0.2 percent to $1.2412, after depreciating to $1.2494, the lowest level since March 5, 2009.
Credit-default swaps on Greek debt climbed 42.5 basis points to 572.5, according to CMA DataVision prices.
China Lacks Buyers
China failed to draw enough bids at a treasury bill sale for a second time in a month on speculation banks are seeking higher returns in longer-maturity debt. The finance ministry sold 17.4 billion yuan ($2.5 billion) of the 20 billion yuan of 273-day securities on offer at an average yield of 1.72 percent, compared with 1.54 percent at the last sale, according to data compiled by Bloomberg. China didn’t complete sales of 273-day and 91-day debt on April 9.
Crude oil for June delivery fell 1.1 percent to $73.62 a barrel in New York trading, taking its four-day slump to 4.1 percent. Refiners must be ready for oil prices to rebound to more than $100 a barrel on growing consumption in Asia, Mukesh Ambani, Asia’s richest man and chairman of Reliance Industries Ltd., said at a conference in Mumbai today.
Industrial Metals Fall
Copper for delivery in three months dropped $160 to $7,000 a metric ton on the London Metal Exchange, leading a decline in industrial metals. Gold rose to $1,249.40 an ounce in London and futures reached $1,249.70 in New York, a record in both cities.
Asian stocks fell for a third day. Sony plummeted 6.8 in Tokyo. Toyota Motor Corp., a Japanese carmaker that gets about 70 percent of its sales abroad, dropped 1.9 percent. Commonwealth Bank of Australia led financial shares lower, falling 2.2 percent in Sydney.
The decline in U.S. futures indicated the S&P 500 may extend yesterday’s 1.2 percent slump, even before a report that may show sales at U.S. retailers rose in April for a seventh straight month, showing consumers are joining the recovery as employment picks up.
Purchases increased 0.2 percent, extending the most successive gains since 1999, according to the median estimate of 83 economists surveyed by Bloomberg News. The Commerce Department’s report is due at 8:30 a.m. in Washington. Other reports today may show manufacturing picked up, consumer confidence increased and businesses boosted inventories.
Turkey ‘Contagion Risk’
The MSCI Emerging Markets Index dropped 0.7 percent, paring the biggest weekly rally in seven months. Turkey’s ISE National 100 Index fell 1.9 percent, the biggest decline among major emerging markets, after Credit Suisse advised reducing stock holdings in the country in part because of “contagion risk” from indebted European nations. Poland’s zloty weakened 1 percent against the euro and the Hungarian forint depreciated 0.9 percent to lead declines in developing-nation currencies.
The cost to protect Thai government bonds from default surged by the most in 15 months, while stocks and the baht fell as the death toll from anti-government protests in Bangkok rose.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
Last Updated: May 14, 2010 05:40 EDT
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