BL: Stocks, U.S. Futures Tumble on China Growth Concern, BP Spill; Oil Plunges
By Justin Carrigan
June 1 (Bloomberg) -- Stocks tumbled, extending the biggest monthly decline in the MSCI World Index since February 2009, commodities dropped and bonds rallied on a slowdown in Chinese manufacturing. BP Plc shares fell the most since 1992 after it abandoned efforts to stop the biggest oil spill in U.S. history.
Futures on the Standard & Poor’s 500 Index slid 1.3 percent at 7:02 a.m. in New York, while the MSCI World retreated 0.8 percent. Crude oil and copper slipped for a second day, while gold traded within about 2 percent of a record high. BP Plc sank 15 percent, its biggest drop since 1992, while its bonds traded in line with debt of companies rated as many as five levels lower, according to Bank of America Merrill Lynch index data.
China’s Federation of Logistics and Purchasing said today its Purchasing Managers’ Index fell to 53.9 in April, lower than the median 54.5 estimate in a Bloomberg News survey of 18 economists, raising concern that the nation’s economy, the engine of global growth, is slowing. BP said a “top kill” attempt to plug the leak in the Gulf of Mexico using heavy fluids and debris had failed, ruling out stopping the flow of oil from the well until relief drilling is completed in August.
There are “emerging signs that the global recovery is already beginning to lose momentum especially in the two major economies of the U.S. and China,” Lee Hardman, a currency strategist at Bank of Tokyo Mitsubishi UFJ Ltd. in London, wrote in a report today. “This was evident again today by the Chinese manufacturing PMI which dropped more sharply than expected.”
Santander, Prudential
More than three shares fell for every one that gained on the MSCI World, which extended its drop of 9.9 percent in May, the biggest monthly decline since February 2009. The Stoxx Europe 600 Index slumped 1.7 percent as all 19 industry groups weakened. Banco Santander SA, Spain’s biggest bank, slipped 3.5 percent in Madrid, while BNP Paribas SA, France’s largest, fell 3.3 percent in Paris. Losses were limited as Prudential Plc rose 4.5 percent in London on speculation its takeover of American International Group Inc.’s main Asian unit won’t proceed.
The yield investors demand to hold BP’s bonds rather than government debt widened to 1.48 percentage points, or 148 basis points. That’s almost double the 77 basis-point average for similarly rated industrial companies and higher than the 124 premium on notes graded five levels lower. BP is rated Aa1 by Moody’s Investors Service. The cost of protecting against a default on BP’s bonds rose to a record, with credit-default swaps tied to the company climbing 77 basis points to 177.
S&P Futures
The decline in U.S. futures indicated the S&P 500 may extend the 1.2 percent drop made on May 28. U.S. equity markets were closed yesterday for the Memorial Day holiday. Manufacturing in the U.S. probably expanded in May for a 10th month, economists said before a report from the Institute for Supply Management at 10 a.m. New York time today. The ISM’s factory index fell to 59 from an almost six-year high of 60.4 in April, according to the median estimate in a Bloomberg News survey of 62 economists. Readings greater than 50 signal growth.
The MSCI Asia Pacific Index sank 1.2 percent. Sony Corp., which gets 69 percent of its sales outside Japan, fell 1 percent in Tokyo as a stronger yen threatened to hurt the value of overseas revenue. Hitachi Ltd., Japan’s No. 3 company by revenue, slumped 3.5 percent after the Financial Times cited the company’s president as saying it’s affected by Europe’s debt crisis.
Emerging Markets
The MSCI Emerging Markets Index declined for the first time in five days, falling 2.1 percent. The MSCI China Index of Hong Kong-traded shares retreated 2.2 percent, while Zijin Mining Group Co. lost 2.8 percent on speculation demand from the world’s largest metals consumer will decline. The Micex Index in Russia, the biggest energy exporter, sank 2.4 percent and the ruble weakened 1.4 percent against the dollar.
Crude oil for July delivery retreated 2.2 percent to $72.34 a barrel. Copper for delivery in three months dropped 3.1 percent to $6,725 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also fell. Gold for immediate delivery rose 0.4 percent to $1,220.65 an ounce, 2.4 percent from the record $1,249.40 reached May 14. The 24-commodity S&P GSCI Total Return Index declined 1.8 percent, the most compared with closing prices since May 17.
The euro fell 1.2 percent against the dollar, extending its longest run of monthly declines in a decade to trade at its weakest since April 2006. The yen advanced versus all 16 of its most-actively traded peers and the Dollar Index rose for a third day. Government bonds gained, with the 10-year German bund yield dropping six basis points to 2.59 percent. The yield on the benchmark 10-year Treasury note declined five basis points to 3.25 percent.
To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net
Last Updated: June 1, 2010 07:16 EDT
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