BLBG:Stocks Tumble for Eighth Day as Commodities Drop
Stocks dropped for an eighth day, the longest losing streak since January 2010, and commodities fell, erasing the Standard & Poor’s GSCI index’s gains for the year, on concern the U.S. recovery is faltering. Bonds jumped, driving Treasury 10-year yields to the lowest in almost 10 months.
The MSCI All-Country World Index sank 1.8 percent at 4:03 p.m. in Tokyo, set for its largest weekly retreat since November 2008. S&P 500 Index futures slid 0.9 percent and Treasury 10- year yields decreased five basis points to 2.35 percent. The cost of insuring European sovereign debt jumped to a record. The yen reversed earlier losses and gained against all 16 major peers, a day after government intervention. The GSCI Index of commodities fell 2.1 percent, paced by oil’s 3.3 percent slump.
More than $4.5 trillion has been wiped off equity market values worldwide since July 26, driving the MSCI index of global shares down more than 10 percent from this year’s high in a so- called correction. The U.S. added 85,000 jobs last month, leaving the 9.2 percent unemployment rate unchanged, according to economists surveyed before data today that will cap a week of economic reports that showed the recovery is slowing.
“Investors are coming to grips with how dramatically the global and U.S. economies have slowed in recent months,” Russ Koesterich, the San Francisco-based global chief investment strategist for the iShares unit of BlackRock Inc., said in a Bloomberg Television interview. His firm oversees $3.66 trillion as the world’s largest asset manager. “What’s really troubling investors is that given the fiscal austerity in Europe and the U.S. and the fact that interest rates are already at zero, it’s not clear what steps governments can do to get us out of this.”
Stocks Slump
The Stoxx Europe 600 Index plunged 2.7 percent, extending its loss for the week to 11 percent. The MSCI Asia Pacific Index fell 4 percent, taking its weekly loss to 8.1 percent. That will be the steepest one-week drop since October 2008, when credit markets froze following the bankruptcy of Lehman Brother Holdings Inc. a month earlier.
Japan’s Nikkei 225 Stock Average sank 3.7 percent, Hong Kong’s Hang Seng Index plunged 5.4 percent and Australia’s S&P/ASX 200 Index slumped 4 percent. Taiwan’s Taiex Index was the biggest loser in Asia today, plunging 5.6 percent. The gauge also entered a correction today, along with the MSCI Asia Pacific Index and South Korea’s Kospi Index. Hutchison Whampoa Ltd. (13), controlled by Hong Kong billionaire Li Ka-shing, dropped 8.9 percent after it reported first-half profit that missed analyst estimates.
‘Panic Attack’
The S&P 500 dropped 60.27 points, or 4.8 percent, to 1,200.07 yesterday. The index has lost 7.1 percent this week amid data that showed manufacturing expanded at the weakest pace in two years, spending unexpectedly fell and the services industries grew at the slowest pace since February 2010.
The S&P 500 may rise 40 to 50 points as markets are now “extremely oversold,” said Marc Faber, the publisher of the Gloom, Boom & Doom report. Still, prices won’t rise to new highs this year, he said in a Bloomberg Television interview. Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said today equities are “looking better” amid the turmoil roiling global markets.
“It’s a panic attack from fear that growth is dropping off a cliff,” said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd. “There was an expectation that resolution of the U.S. debt- ceiling issue would trigger a relief rally. It looks like everyone forgot about the weakness in the underlying economy.”
Payrolls
Today’s payrolls figures will follow the June increase of 18,000 jobs, the smallest this year. Concern the recovery is faltering drove investors to seek refuge in Treasuries, sending 10-year yields down 22 basis points yesterday to 2.40 percent. Yields sank to the lowest level since Oct. 8.
Two-year rates set a record low of 0.2527 percent yesterday. The 10-year yield has dropped 40 basis points this week, the most since the period ended Dec. 19, 2008, according to data compiled by Bloomberg. On Dec. 16 of that year, the Fed cut its target for overnight bank lending to a range of zero to 0.25 percent, a record low, to support the economy.
Japan’s 10-year bond yields slid to as low as 0.985 percent, the least this year. Australia’s 10-year rate fell to 4.42 percent, a two-year low. The yield on South Korea’s 3.5 percent bonds due June 2014 fell 12 basis points to an eight-week low of 3.62 percent, according to prices from Korea Exchange Inc. German 10-year yields dropped for an 11th day, sliding seven basis points to 2.23 percent.
Default Risk
The Markit iTraxx SovX Western Europe Index of swaps linked to the debt of 15 governments jumped 12.5 basis points to an all-time high of 308 basis points, according to Markit Group Ltd.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 11.5 basis points to 135 basis points, according to Credit Agricole CIB. That will be its highest close since Aug. 31 last year and the biggest daily increase since May 25, 2010, according to prices from CMA, which is owned by CME Group Inc.
The Dollar Index climbed 0.1 percent, taking its weekly rally to 1.8 percent. That’s the first gain in four weeks. The U.S. currency traded at 78.41 yen from 78.89 yen yesterday, when Japan unilaterally sold its currency to stem gains. That drove the yen to as weak as 80.24, which was the lowest level since July 12.
The Swiss franc weakened 0.3 percent to 76.61 centimes against the greenback. The currency is headed for a weekly rally even after the nation’s central bank unexpectedly cut interest rates and pledged to boost the supply of the franc in money markets. The dollar was at $1.4113 per euro, compared with $1.4092 yesterday.
Pledging Support
China’s Foreign Minister Yang Jiechi said his nation will support Europe and the euro, in an interview with Polish media posted on a Chinese government website today. He said that the risk of the U.S. defaulting on its debt is rising and urged America’s leaders to be “responsible.”
Economic reports next week may show Chinese consumer prices rose 6.4 percent in July from a year earlier, matching June’s increase, according to a Bloomberg survey of economists. This would leave China, which led the rebound from the global recession in 2009, with limited room to counter weakening growth in the U.S. and Europe.
The Australian dollar slid to $1.0438, extending its weekly slump to 5.1 percent, after the Reserve Bank forecast growth in 2011 will average 2 percent, down from its May 6 estimate of 3.25 percent. The central bank also raised the outlook for inflation to 3.5 percent from a previous prediction of 3.25 percent.
Commodities Slump
Oil for September delivery fell 3.3 percent to $83.76 a barrel on the New York Mercantile Exchange. Futures are dropping for a sixth straight day and have erased this year’s gains. Wheat dropped 1.7 percent to $7.135 a bushel, while corn retreated 1.4 percent to $6.915 a bushel.
Copper for three-month delivery declined 2 percent to $9,170 a metric ton in London, while zinc fell 3.4 percent to $2,250 a ton, set for an eight-day plunge.
Immediate-delivery gold rallied, climbing 0.8 percent to $1,658.80 an ounce. Bullion reached an all-time high of $1,681.72 yesterday. Cash silver rose 0.3 percent to $39.02, rebounding from yesterday’s 6.7 percent plunge.
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
