Stocks and commodities fell around the world on concern swine flu will damp the global economic recovery and U.S. regulators will make banks raise capital after failing so-called stress tests. The Dow Jones Stoxx 600 Index of European shares dropped 2.3 percent, led by raw-material producers and banks. Futures on the Standard & Poor’s 500 Index slipped 1.7 percent after the Wall Street Journal said the U.S. government’s examination of lenders shows Bank of America Corp. and Citigroup Inc. may need more capital. Hogs and pork-belly futures extended declines after falling by their limit in Chicago yesterday. The World Health Organization raised its global pandemic alert to the highest since the system was adopted in 2005 and said swine flu was no longer containable as 152 people died in Mexico. Bank of America’s shortfall comes to billions of dollars, the Journal said. The Charlotte, North Carolina-based lender and New York-based Citigroup have received a combined $90 billion in U.S. bailout funds. “The combination of stress tests and swine flu and mixed earnings are weighing on the market,” said Suki Mann, a credit strategist at Societe Generale SA in London. The two-day slump snuffed out a six-week rebound by the MSCI World Index. The gauge of stocks in 23 developed countries had advanced 28 percent from March 9 through last week as investors speculated government efforts to fix the banking system would pull the economy out of a recession. U.S. Earnings While almost 67 percent of the S&P 500 companies that reported first-quarter results have beaten estimates, analysts predict profits will decline through September, dropping 34 percent in the first quarter and 33 percent in the second. U.S. Steel Corp., the nation’s largest steelmaker, reported a first-quarter net loss that was more than twice analysts’ estimates and cut its dividend as prices plunged after the close of trading yesterday. The Pittsburgh-based company’s shares slid 6 percent to $26.05 in Germany. Daimler AG, the world’s second-largest maker of luxury cars, declined 5.4 percent to 25.91 euros. The Stuttgart, Germany-based company posted its first back-to-back quarterly losses in at least 10 years as the recession led to a drop in sales of Mercedes-Benz cars and trucks. Bank of America, Citigroup Bank of America lost 8.1 percent to $8.20 in pre-market New York trading, while Citigroup fell 8.1 percent to $2.82. Bank of America and Citigroup plan to mount rebuttals to the Federal Reserve’s preliminary report following the tests conducted on 19 financial companies, the Journal said. Richard Tesvich, a spokesman for Citigroup in Hong Kong, declined to comment, as did Bank of America spokeswoman Elizabeth Wood in London. Emerging-market equities, currencies and bonds dropped for a second day. The MSCI Emerging Markets Index sank 2.1 percent to the lowest level in more than two weeks. Russian shares led the retreat, with the benchmark Micex index losing 3.8 percent as OAO Lukoil declined on lower crude prices. Mexico’s peso weakened 0.1 percent against the U.S. currency, following yesterday’s 5.1 percent loss. Barclays Capital Inc. said the country is more likely to draw on a credit line from the International Monetary Fund because of the swine flu outbreak. Hog futures for June settlement dropped 0.8 percent to 68.1 cents a pound on the Chicago Mercantile Exchange today. Pork- belly futures for July delivery fell 3.6 percent to 80.8 cents a pound in Chicago. ‘The Wall’ “Understandably investors have stepped back on the news this morning,” Dominic Wilson, a senior global economist at Goldman Sachs Group Inc. in New York, wrote in a report. “So this will be one more worry in the wall that the market has been climbing.” Copper, aluminum and nickel retreated in London on the prospects for slower economic growth and crude oil weakened on the outlook for air travel. Copper for delivery in three months fell as much as 3 percent to $4,215 a metric ton on the London Metal Exchange. Aluminum retreated as much as 1.6 percent and nickel 2.9 percent. Crude for June delivery slid as much as 3 percent to $48.66 a barrel in after-hours electronic trading on the New York Mercantile Exchange. “Swine flu could not have worse timing,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “As sentiment was already fragile, it has served as an excuse to liquidate positions and take profits in oil, metals and equities.” The yen climbed to a six-week high against the euro and U.S. Treasuries rose. The Japanese currency strengthened 1 percent to 125.02 per euro and 0.9 percent to 95.96 per dollar. The yield on the U.S. 10-year note dropped one basis point to 2.90 percent. Corporate Bonds Bonds sold by non-financial companies in euros rose. The Markit iBoxx Euro Non-Financial Corporate index climbed by as much as 0.2 percent, matching yesterday’s eight-month high of 89.18. The iBoxx Sterling Non-Financial Corporate index added 0.3 percent to 94.25, the highest level in a week. The euro bond index has jumped 8 percent from 82.79 in October as investors snapped up bonds for the highest yields on record relative to government debt. The spread has narrowed 68 basis points to 3.95 percentage points since reaching 4.63 percentage points March 20, according to Merrill Lynch & Co. data.

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