Stocks fell, with a global benchmark index set for the lowest level this month, while the euro slid to a two-week low against the dollar and yen, and bonds of Europe’s most indebted nations dropped on concern the region’s crisis will spread to Italy while U.S. and China growth slows.
The MSCI All-Country World Index decreased 0.5 percent as of 4:13 p.m. in Tokyo. Standard & Poor’s 500 Index futures sank 0.7 percent and Treasuries rose for a second day. The euro lost 0.7 percent to $1.4168 and retreated 0.5 percent to 114.49 yen. Spain’s 10-year yield spread over Germany widened to a euro-era record of 300 basis points. The S&P GSCI Index of commodities fell for a second day, with oil dropping 1.1 percent in New York.
A meeting of European Union and European Commission chiefs today was enlarged amid speculation Italy may be engulfed by the crisis and divisions on how to structure aid for Greece. China’s consumer prices rose the most in three years in June and exports increased the least since December, adding to signs that Asia’s largest economy cooled last quarter. Alcoa Inc. (AA) will start the second-quarter earnings season today in the U.S., where data on July 8 showed the unemployment rate rose as hiring slowed.
“We’re heading into ‘risk off,’ particularly with all these jitters about Italy potentially facing some problems with its debt,” Arjuna Mahendran, Asian head of investment strategy at HSBC Private Bank, said in a Bloomberg Television interview in Singapore. “There is a lot of worry around.”
The MSCI All-Country World Index was set for its lowest close since June 30 and the Stoxx Europe 600 Index lost 0.3 percent. The MSCI Asia Pacific Index dropped 1.1 percent, set for the biggest retreat since June 16. Japan’s Nikkei 225 Stock Average lost 0.7 percent and Hong Kong’s Hang Seng Index slumped 1.5 percent.
Australia Tax
Australia’s S&P/ASX 200 Index slipped 1.6 percent after Prime Minister Julia Gillard yesterday announced the nation’s first tax on greenhouse gas emissions. Alumina Ltd. (AWC) tumbled 3.2 percent while Virgin Blue Holdings Ltd. (VBA) decreased 2.9 percent amid speculation the levy will hurt the earnings of mining companies and airlines.
News Corp. (NWSA) sank 5.1 percent in Sydney on concern investigations into hacking activities at the News of the World will threaten the company’s bid for British Sky Broadcasting Group Plc. Hsu Fu Chi International Ltd. (HFCI) jumped 8.8 percent in Singapore after Nestle SA, the world’s largest food company, agreed to buy 60 percent of the Chinese snack and candy maker.
Industrial & Commercial Bank of China Ltd. slid 1.9 percent, pacing declines among Chinese financial companies traded in Hong Kong, after the nation’s consumer price index jumped 6.4 percent in June, the most since June 2008 and more than the 6.2 percent forecast by economists. Separate data released yesterday showed exports rose a smaller-than-forecast 17.9 percent. That was the lowest since December after excluding seasonal distortions from the Chinese New Year.
U.S. Earnings
The S&P 500 fell 0.7 percent on July 8, its biggest loss in two weeks, after Labor Department figures showed U.S. payrolls rose 18,000 in June, 83 percent less than economists predicted. The unemployment rate rose to a 2011 high of 9.2 percent.
Alcoa, the largest U.S. aluminum producer, will be the first company on the Dow Jones Industrial Average to report quarterly earnings today. Profits at S&P 500 companies are projected to have gained 13 percent in the second quarter, the smallest increase in two years, according to analyst estimates compiled by Bloomberg.
Treasury 10-year yields fell two basis points to 3.01 percent, following an 11 basis point drop on July 8. President Barack Obama and congressional leaders made little progress in debt-reduction talks a day after House Speaker John Boehner said all sides must settle for a smaller plan than the president seeks, according to congressional aides familiar with the talks.
Expanded Meeting
The euro weakened against 13 of its 16 most-actively traded counterparts. The shared currency touched $1.4165, the lowest level since June 27, and reached 114.40 yen earlier. A regular meeting of EU President Herman van Rompuy and Commission President Jose Manuel Barroso will be enlarged to include European Central Bank President Jean-Claude Trichet, Luxembourg Prime Minister Jean-Claude Juncker and European Economic Commissioner Olli Rehn, said Jesus Carmona, a spokesman for Van Rompuy, in a phone interview yesterday.
The euro-region’s bailout fund may have to be doubled to 1.5 trillion euros ($2.13 trillion) to cover a crisis in Italy, the ECB said, according to German newspaper Die Welt, citing unidentified “high ranking” people at central banks. European leaders are prepared to accept that Greece should default on some of its bonds as part of a new bailout plan for the country that would put its total debt levels on a sustainable footing, the Financial Times reported, citing unnamed senior officials.
‘Contagion’ Concerns
“There is a chance of contagion should default occur and that has consequences for the private sector, the banks in Europe, for credit spreads, borrowing costs and bond yields globally,” said Steven Milch, an investment strategist at Suncorp Wealth Management in Sydney. “So it’s clearly more than just Greece; whether it’s Italy or Spain or Portugal or Ireland is hard to say but clearly there are some serious issues there.”
The South Korean won depreciated 0.1 percent to 1,058 per dollar, after rising on July 8 to the strongest level since August 2008. Malaysia’s ringgit dropped 0.4 percent to 3.0035 per dollar after a report showed industrial production fell for a second straight month. The New Zealand dollar slipped 0.5 percent to 83.38 U.S. cents, snapping a three-day gain, while Australia’s currency weakened 0.5 percent to $1.0697.
The cost of protecting Asia-Pacific corporate and sovereign bonds from default increased, with the Markit iTraxx Australia index rising six basis points to 117.5 basis points, headed for the highest close since June 28, prices from Australia & New Zealand Banking Group Ltd. and CMA show. The increase will be the most in seven months.
Crude fell 1.1 percent to $95.17 a barrel on the New York Mercantile Exchange, extending a 2.5 percent plunge July 8. Three-month copper retreated 0.3 percent to $9,631 a metric ton on the London Metal Exchange, while lead dropped 1.1 percent.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
