Stocks fell in Europe for a sixth day, US index futures declined and the yen strengthened as concern deepened the global recovery may slow. Copper led commodities lower, while oil dropped as OPEC meets.
The Stoxx Europe 600 Index slid 1 per cent at 8:45 am in New York and futures on the Standard & Poor’s 500 Index lost 0.3 per cent. The yen appreciated against all of its 16 major peers. German 10-year bond yields slipped three basis points to 3.06 per cent, while the cost of insuring European government debt from default rose for a third day. Copper retreated 1.9 per cent and crude oil slid 0.6 per cent.
Federal Reserve Chairman Ben S. Bernanke said yesterday the US recovery was “frustratingly slow,” without giving a hint of a new round of stimulus before the program of buying $600 billion in bonds ends this month. Global gross domestic product may expand 3.2 per cent this year, less than the 3.3 per cent forecast in January, the World Bank said. German industrial production unexpectedly declined for the first time in four months in April, the government said.
“Markets are a little bit more concerned that this loss of recovery momentum in the US could translate into a loss of earnings momentum,” said Mike Lenhoff, London-based chief strategist at Brewin Dolphin Securities Ltd. “Markets have always been a bit apprehensive about the global economy’s transition from a recovery to a sustainable expansion.”
The Stoxx 600 fell to the lowest level in 2 1/2 months as all 19 industry groups retreated. BP Plc and Rio Tinto Group led commodity producers lower. Kabel Deutschland Holding AG sank 5 per cent as Germany’s largest cable operator reported revenue that was at the low end of its forecast range and announced a dividend that trailed analysts’ estimates.
BEIGE BOOK
The drop in S&P 500 futures indicated the benchmark gauge for US equities will slide for a sixth day. That would be the longest stretch of losses since February 2009. The yield on two- year Treasury notes fell one basis point to 0.40 per cent. It reached 0.39 per cent yesterday, the lowest since November 9. The Fed is due to release its regional Beige Book economic survey on Wednesday.
The yen appreciated 0.3 per cent to 79.82 per dollar after touching 79.70, the strongest since May 5. Japan’s currency rose 0.9 per cent against the euro. The pound dropped 0.5 per cent against the dollar after Moody’s Investors Service said the UK’s Aaa credit rating may be at risk.
Portugal’s 10-year bond fell for a second day, sending the yield 15 basis points higher. The extra yield investors demand to hold the country’s debt instead of benchmark German bunds to a record 7.04 basis points, or 7.04 percentage points. The International Monetary Fund said its 26 billion-euro ($38 billion) loan to Portugal “entails important risks.”
DEFAULT RISK
The Markit iTraxx SovX Western Europe Index of credit- default swaps linked to the debt of 15 governments increased four basis points to 193 basis points. Crude oil fell 60 cents to $98.49 a barrel. The Organization of Petroleum Exporting Countries will raise its output target on Wednesday at its meeting in Vienna, according to a Gulf delegate with knowledge of the matter.
