Stocks dropped for a fourth day, U.S. futures slipped and commodities fell while the yen strengthened to a 15-year high against the dollar on concern the economic recovery is dissipating. Government bonds rallied.
The Stoxx Europe 600 Index declined 1.3 percent at 10:25 a.m. in London, while Japan’s Nikkei 225 Stock Average entered a bear market. Standard & Poor’s 500 Index futures sank 0.8 percent. The yen appreciated against all of its 16 major peers. German 10-year bonds jumped, widening the yield difference with Irish debt to within nine basis points of its euro-era record. Oil and copper retreated for a fifth day.
Sales of existing U.S. homes probably tumbled in July to the lowest level since March 2009, according to a Bloomberg survey. CRH Plc, the world’s second-largest maker of building materials, forecast lower earnings, citing concern about the U.S. outlook. Slower Asian economic growth will have a “serious negative impact,” Olli Rehn, the European Union’s economic chief, said yesterday in a Bloomberg Television interview.
“Yields down, yen up, risk off,” a team led by Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, wrote today in a report. “Today’s key economic data will come in the form of U.S. existing home sales, and the only straw anyone could snatch at is that no-one has any hope of good news. Equities are vulnerable today.”
CRH, Vedanta, Cairn
The MSCI World Index of stocks in 24 developed nations fell 0.6 percent. Construction and materials companies led declines by all 19 industries on Europe’s Stoxx 600, while more than 16 shares dropped for every one that gained. CRH slumped 15 percent, the biggest intraday drop since 2002. Vedanta Resources Plc tumbled 5.7 percent to a 10-month low. Cairn Energy Plc sank 1.4 percent after its first well off Greenland found natural gas rather than crude oil. WPP Plc, the world’s largest advertising company, lost 3 percent after profit missed estimates.
Rio Tinto Group slipped 2.8 percent after the Globe and Mail reported that the world’s third-largest mining company may be considering a bid for Potash Corp. of Saskatchewan Inc. together with a Chinese partner to rival a $40 billion proposal by BHP Billiton Ltd. Dell Inc. fell 1.1 percent in Germany as a person close to the matter said the company may raise its bid for 3Par Inc. after Hewlett-Packard Co. offered to buy the maker of data-center equipment for about $1.6 billion, 33 percent higher than Dell’s offer.
Bear Markets
The MSCI Asia Pacific Index sank 0.8 percent as Japan’s Nikkei 225 fell to its lowest close since May 1, 2009. The gauge has fallen 21 percent since reaching an 18-month high on April 5, a drop that signifies a bear market to some analysts. Vietnam’s VN Index tumbled 3 percent, taking its drop since May 6 to 21 percent.
The decline in U.S. futures indicated the S&P 500 may drop for a fourth day. Purchases of previously owned U.S. homes plunged 13.4 percent from June to a 4.65 million annual rate, a third decline in a row, according to the median of 74 forecasts in a Bloomberg News survey. The report from the National Association of Realtors is due at 10 a.m. in Washington.
The yield spread between Irish and German 10-year government debt widened two basis points to 307 basis points, near the level set before the European Union and the International Monetary Fund set up a 750 billion euro ($947 billion) fund to protect the single currency on May 8. The Greek-German spread gained five basis points to 867 basis points, and the Portuguese-German spread increased nine basis points to 306 basis points.
Treasuries, Bunds
Treasuries and German government bonds rose, with the yield on 10- and 30-year bunds falling to record lows. U.S. 10-year yields fell five basis points to 2.55 percent, within one basis point of the least since March 2009. German 10-year yields fell four basis points to 2.24 percent, while 30-year yields also dropped four basis points, to 2.87 percent. U.S. two-year note yields were within one basis point of a record low before the sale $37 billion of the securities.
Europe is at risk of going into a so-called “double-dip” recession, as governments cut spending to narrow their fiscal deficits, Nobel Prize-winning economist Joseph Stiglitz said in an interview with Dublin-based RTE Radio today.
The pound fell to its weakest level in almost a month against the dollar after Bank of England policy maker Martin Weale said the U.K. economy may slip back into a recession. The British currency depreciated 0.6 percent to $1.5412 and weakened 0.5 percent to 82 pence per euro.
Yen, Dollar
The yen appreciated 0.8 percent to 84.45 per dollar, the strongest since July 1995. It jumped 1.6 percent against the Korean won. The dollar climbed against all its major peers except the yen, while the euro fell 0.2 percent to its lowest against the U.S. currency since July 13.
Industrial metals declined for a fifth day, led by a 2 percent drop in nickel prices on the London Metal Exchange. Inventories of nickel, copper, lead and zinc all increased in warehouses monitored by the LME, signaling slowing demand for the metals. Oil declined 0.9 percent to $72.43 a barrel in New York as analysts estimated that U.S. inventories of crude rose last week.
Raw-materials stocks led a 1 percent drop in the MSCI Emerging Markets Index, the biggest decline in nine days. The Philippine Stock Exchange Index sank 2.3 percent, the most in 11 weeks, and the peso fell 1 percent against the dollar after at least eight tourists from Hong Kong were killed by gunfire yesterday in a bus siege in Manila.
Hungary’s forint dropped to a three-week low against the euro after the central bank raised its inflation forecast and lowered its growth estimates for the next two years. South Africa’s rand slumped 0.7 percent versus the dollar before a report today that may show economic growth slowed in the second quarter.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
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