Stocks dropped, dragging global equities to a fourth weekly loss, and Standard & Poor’s 500 Index futures fell on concern the U.S. recovery is faltering and Europe’s debt crisis will spread. Oil sank for a second day, the yen and Swiss franc rose, while gold climbed to an all-time high. The MSCI All-Country World Index declined 1 percent at 4:22 p.m. in Tokyo. South Korea’s Kospi Index plunged the most since 2008 and the Stoxx Europe 600 Index lost 1.1 percent, extending yesterday’s 4.8 percent slump. S&P 500 Index (SPX) futures slid 0.6 percent. The yen and Swiss franc strengthened against most their major peers. Treasury 10-year yields were little changed after yesterday sinking to a record low. Crude tumbled 1.3 percent in New York and gold topped $1,850 an ounce for the first time. Citigroup Inc. cut its forecasts for expansion in the world’s largest economy, while Morgan Stanley lowered targets for stock indexes in Indonesia and Singapore. Regulators from the U.S., South Korea and Sweden said the market turmoil posed further risks to growth, after data yesterday showed American jobless claims rose and a measure of manufacturing contracted. “There’s a total lack of confidence in policy makers’ ability to defuse the situation,” said Nader Naeimi, a Sydney- based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “Fear is breeding fear now.” More than 14 shares retreated for each one that gained on the Stoxx 600, which sank yesterday by the most since March 2009. The MSCI Asia Pacific Index dropped 3.1 percent in Asia today and is headed for a fourth weekly loss that will be the longest stretch of declines since the period ended June 17. Asia’s Rout Japan’s Nikkei 225 Stock Average dropped 2.5 percent and Australia’s S&P/ASX 200 Index retreated 3.5 percent. The Kospi Index sank 6.2 percent, the most since November 2008. South Korea’s exchange halted program trading of shares for five minutes amid a plunge in futures. Billabong International Ltd. (BBG) sank 26 percent in Sydney after the surf-wear maker scrapped its earnings forecast and posted lower-than-estimated profit. Futures expiring in September signal the S&P 500 may extend yesterday’s 4.5 percent slump. Shares of Hewlett-Packard Co. (HPQ), the world’s largest computer maker, added to stock losses in extended trading after the company agreed to buy software maker Autonomy Corp. for $10.3 billion and will weigh a breakup that would unravel the purchase of Compaq Computer Corp. Hewlett- Packard had earlier cut its full-year profit forecast. “The massive exodus from risk markets reflects heightened concerns with a possible recession and the accelerated loss of trust in policy makers,” Mohamed El-Erian, chief executive officer and co-chief investment officer at Pacific Investment Management Co., the world’s biggest manager of bond funds, wrote in an e-mail yesterday. U.S. Weakness The S&P 500 has tumbled 16 percent from its April high, about the same as the retreat between April 23 and July 2, 2010, previously the biggest contraction of the bull market that began in March 2009. Citigroup cut its U.S. gross domestic product growth estimate to 1.6 percent in 2011 from 1.7 percent, and lowered its forecast for 2012 to 2.1 percent from 2.7 percent. U.S. initial jobless claims climbed by 9,000 to 408,000 in the week ended Aug. 13, topping the median estimate of economists surveyed by Bloomberg for a rise to 400,000. The Fed Bank of Philadelphia’s general economic index unexpectedly plunged to minus 30.7, the lowest level since March 2009, just a day after the bank’s President Charles Plosser said the U.S. economy is growing and doesn’t need exceptional measures. Separate data showed consumer confidence weakened. Federal Reserve Bank of Dallas President Richard Fisher said the central bank’s pledge to keep the benchmark U.S. interest rate near zero through at least mid-2013 may lead hurt growth by reassuring companies they can delay borrowing without facing higher costs. Yields Near Lows Ten-year Treasury yields fell as much as 19 basis points to 1.97 percent yesterday. The rate was at 2.07 percent today, after earlier sinking to 2 percent. Thirty-year Treasury yields fell four basis points to 3.38 percent today, adding to a three- day, 35 basis-point drop. Japanese government bonds also rose, driving the yield on the benchmark 10-year security down to 0.97 percent, the lowest level this year. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose seven basis points to 153.5 after earlier gaining 11 basis points, according to Royal Bank of Scotland Group Plc prices. The Markit iTraxx Australia index rose 13 basis points to 163 basis points, Westpac Banking Corp. prices show, headed for its highest level since July 2009. The yen rose to 109.41 per euro from 109.76 in New York yesterday, set for a fourth day of gains. The dollar climbed 0.1 percent to $1.4313 against the euro, after a 0.7 percent rally yesterday, and strengthened 0.2 percent to $1.037 against its Australian counterpart. The Swiss franc rallied 0.7 percent against the euro and 0.5 percent against the greenback. Korea’s Concern The South Korean won weakened 1.3 percent to 1,087.55 per dollar after the Financial Supervisory Service’s Governor Kwon Hyouk Se asked the nation’s insurance companies to expand capital on concern the market rout will erode their finances. The Fed lent Switzerland’s central bank $200 million in a program aimed at easing credit strains in Europe, the New York Fed reported yesterday. The transaction was the first time the program has been used since March, when the European Central Bank tapped $70 million. The ECB said on Aug. 17 it will lend dollars for the first time in six months after one bank took up its weekly offer. “It won’t take much for the interbank market to collapse,” Lars Frisell, chief economist at Sweden’s financial regulator, said yesterday in an interview in Stockholm. Crude for September delivery lost 1.3 percent to $81.35 a barrel on the New York Mercantile Exchange. Futures slumped 5.9 percent yesterday. Brent oil for October settlement fell 0.9 percent to $105.98 a barrel on the London-based ICE Futures Europe exchange. S&P’s GSCI Index of 24 commodities slipped 0.5 percent and is little changed this year, compared with an 11 percent drop on the MSCI All-Country World Index of equities. Immediate-delivery gold jumped as much as 1.7 percent to a record $1,854.20 an ounce before trading at $1,853. Bullion has gained 6.1 percent this week. That’s the seventh straight weekly gain, the longest winning streak since 2007. To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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