European stocks slid to a 10-month low, U.S. futures fell and Treasury yields reached the lowest level this year as an unexpected decrease in personal spending added to signs U.S. growth is slowing. The Swiss franc and the cost of insuring against France defaulting rose to a record.
The Stoxx Europe 600 Index declined as much as 1.5 percent by 8:41 a.m. in New York, extending its retreat from this year’s peak in February to more than 11 percent. Standard & Poor’s 500 Index futures slipped 0.8 percent. Yields on 10-year Treasuries dropped to as low as 2.687 percent and the Swiss franc advanced against all 16 of its most-traded peers. The 10-year Italian bond yield touched to a euro-era record of 6.25 percent. Credit- default swaps protecting French debt rose 8 basis points to 133.
Investors sought the safety of Treasuries and the Swiss currency as the U.S. Senate prepared to vote on raising the debt limit before a possible default. Attention shifted to weakening economic data, including today’s 0.2 percent decrease in consumer spending, the slowest growth in personal incomes since November and a report yesterday that showed American manufacturing sank to a two-year low.
“In this U.S.-versus-Europe ugly contest, it’s hard to decide where to start from,” analysts at BNP Paribas wrote in a research note. “The economic slowdown is blatantly obvious in the large drop in U.S. manufacturing. And the issue of a U.S. downgrade remains open. Things are looking less comfy in Europe too, with Italy spreads again under severe pressure.”
Charm Bracelets
Nine stocks fell for each that gained in the Stoxx 600. Pandora A/S plunged 71 percent as the Danish maker of charm bracelets cut its forecast and Chief Executive Officer Mikkel Vendelin Olesen quit. Metro AG, Germany’s largest retailer, slid 5.9 percent as earnings missed estimates. Barclays Plc, Britain’s second-largest bank by assets, rose 3.7 percent after saying it will cut about 3,000 jobs this year.
The decline in S&P 500 futures indicated the benchmark gauge for U.S. equities will drop for a seventh day. That would be the longest losing streak since October 2008.
The 10-year Treasury yield declined five basis points to 2.70 percent. The difference between two- and 10-year yields shrank to 2.35 percentage points, the narrowest since December, as demand reduced the extra yield investors require to hold longer-maturity debt.
Swiss Franc
The Swiss franc strengthened as much as 1.6 percent to a record 1.09877 per euro and appreciated 0.5 versus the dollar. The Dollar Index, which tracks the U.S. currency against those of six trading partners, increased 0.5 percent, rising for the second straight day. The euro declined 0.5 percent to $1.4174.
The yield on the Italian 10-year bond jumped as much as 25 basis points, driving the extra yield investors demand to hold the securities instead of benchmark German bunds to a euro-era record 3.84 percentage points. The Spanish 10-year yield surged as much as 26 basis points to 6.46 percent, also the highest since the euro was introduced in 1999.
German 10-year bonds rose for the eighth day, the longest run of gains since October 2009, with the yield falling four basis points to 2.42 percent. The similar-maturity U.K. gilt yield dropped to as low as 2.76 percent, the least since Bloomberg began compiling the data in 1989.
The Australian dollar slid 1.3 percent versus the greenback and 1 percent against the yen after the central bank kept its benchmark interest rate unchanged, citing an “acute sense of uncertainty in global financial markets.” Reserve Bank Governor Glenn Stevens held the overnight cash rate target at 4.75 percent in Sydney for a record eighth-straight meeting.
Western Europe
Credit-default swaps tied to Spain’s debt surged 23 basis points to 413 and Italy jumped 29 to 362, according to CMA. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments jumped 13 basis points to 290, approaching the record closing price of 306.5 set July 18.
Oil fell 1 percent to $93.91 a barrel in New York and gasoline retreated 0.7 percent, declining for a fifth day. The Standard & Poor’s GSCI index of 24 commodities slipped 0.6 percent, the fifth consecutive drop.
The MSCI Emerging Markets Index slid 1.5 percent, the steepest drop since July 12. South Korea’s Kospi Index (KOSPI) fell 2.4 percent, the most since May 23. The Shanghai Composite Index declined 0.9 percent after an official Xinhua News Agency website said China may boost borrowing costs next week. The Bombay Stock Exchange Sensitive Index dropped 1.1 percent after Reserve Bank of India Governor Duvvuri Subbarao said yesterday that interest rates would have to rise further.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net
