Stocks declined for the first time in five days, Treasuries fell and gold rallied to a record as U.S. President Barack Obama and Congress failed to reach a deal on raising the debt ceiling. The Swiss franc strengthened. The MSCI All-Country World Index fell 0.3 percent at 10:32 a.m. in London and Standard & Poor’s 500 Index futures retreated 0.7 percent. The franc appreciated against all 16 major peers monitored by Bloomberg, climbing as much as 1.7 percent versus the dollar. The yield on the 30-year Treasury bond rose four basis points, while the Portuguese 10-year yield jumped 12 basis points. Gold added as much as 1.4 percent to $1,624.07 an ounce. U.S. House Speaker John Boehner plans to press ahead with a two-step debt-limit extension that Obama has threatened to veto, fueling concern the nation is lurching toward a default as early as Aug. 2 and jeopardizing its AAA credit rating. Greece’s credit rating was cut three steps by Moody’s Investors Service, which said the European Union’s rescue for the nation will cause “substantial” losses for investors. “Stock markets around the globe will look to price in a greater uncertainty premium on account of political squabbles in the world’s largest economy and the increasing risk that it may lose its sacred AAA rating,” Mohamed A. El-Erian, chief executive officer and co-chief investment officer at Pacific Investment Management Co., wrote in an e-mail. His firm manages the world’s biggest bond fund. “A last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable,” he said. Treasury Note Yields The decline in S&P 500 futures indicated the measure will decrease from a two-week high. The gauge rallied 2.2 percent last week as Europe pledged support for Greece to end the region’s debt crisis and companies from Apple Inc. to Morgan Stanley beat analysts’ earnings projections. The 10-year Treasury note yield increased two basis points. The cost of insuring U.S. debt rose after Boehner told Republicans yesterday they needed to block Obama, who has asked for a $2.4 trillion borrowing boost in the $14.3 trillion debt ceiling, from obtaining the money all at once, without any guarantees of spending cuts. Credit-default swaps on Treasuries increased two basis points to 55, the highest in a week, according to CMA. Negotiations in Washington over the nation’s debt limit have whipsawed U.S. stocks as Obama and congressional Republicans try to reach a compromise on raising the debt ceiling before an Aug. 2 deadline. Swiss Franc Gains The Swiss franc approached a record versus the dollar, strengthening to 80.42 centimes, and gained 1.6 percent against the 17-nation euro. The Dollar Index, which tracks the currency against those of six trading partners, declined 0.1 percent, with the greenback weakening 0.5 percent versus the yen. The euro also dropped against the yen, depreciating 0.3 percent. The Stoxx Europe 600 Index was little changed after paring earlier declines. Banks led losses, with Intesa Sanpaolo SpA, Italy’s second-biggest lender, dropping more than 4 percent. The Shanghai Composite Index tumbled 3 percent, the most in six months, and the MSCI Emerging Markets Index retreated 0.6 percent. CSR Corp. and China CNR Corp., China’s biggest train makers, led losses in Shanghai after a weekend collision killed at least 36 people and prompted the government to order a rail- safety inspection. Hungary’s forint weakened 1.8 percent against the Swiss franc, while South Africa’s rand depreciated 0.4 percent versus the dollar. Turkish Current Account The Turkish lira weakened 1 percent against the U.S. currency on growing concern that the country’s record current- account deficit may leave it vulnerable to a drop in risk appetite. The lira pared an early decline of as much as 2.2 percent after the central bank said it suspended daily dollar purchases. Secretary of State Hillary Clinton today reassured China, the top holder of American debt, the U.S. will resolve the impasse over the debt ceiling, while People’s Bank of China adviser Xia Bin said he remains confident an agreement will be reached. The Commerce Department may say on July 29 U.S. gross domestic product rose at a 1.8 percent annual pace in the second quarter after a 1.9 percent gain in the previous three months, according to the median forecast of 69 economist surveyed by Bloomberg News. Home sales languished and consumer confidence dimmed, other data may show. Gold for immediate delivery rose for a second day while silver rose 2 percent to $40.9037 an ounce. West Texas Intermediate crude oil retreated 0.6 percent to $99.25 a barrel on the New York Mercantile Exchange, following four weeks of gains. Copper for three-month delivery slid for a fourth day, declining 0.4 percent on the London Metal Exchange. Corn for December delivery slid 1.5 percent. To contact the reporter on this story: Stephen Voss in London at sev@bloomberg.net To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net

Source