BLBG:Stocks, Italian Bonds Drop as Euro Weakens on Debt Crisis; Gold Advances
Stocks fell, Italian bonds dropped for an 11th day and the cost of government and bank default insurance rose to records on concern Europe’s debt crisis will worsen. The euro weakened, while the dollar and gold gained.
The MSCI All-Country World Index sank 1.5 percent at 10:20 a.m. in London. Banks led the Stoxx Europe 600 Index 2.5 percent lower. The yield on the Italian 10-year bond rose 11 basis points in the longest sequence of gains since the euro’s debut in 1999. The German bund yield fell to a record. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose 8.5 basis points. The euro weakened for the fifth day versus the dollar, the longest streak since January.
German Chancellor Angela Merkel’s party lost weekend elections in her home state, stoking concern opposition is growing to bailouts for debt-saddled European nations. The U.S. filed 17 lawsuits against banks on Sept. 2 to recover $196 billion spent on mortgage-backed securities bought by Fannie Mae and Freddie Mac. Citigroup Inc. cut its 2011 global economic growth forecast today to 3.1 percent from 3.7 percent. U.S. markets are closed today for the Labor Day holiday.
“Sovereign risk-related events remain the main market drivers,” Markus Ernst, a strategist at UniCredit SpA in Munich, wrote in a note. “The negative market sentiment is unlikely to change for the better in Europe.”
All 19 industries in the Stoxx 600 retreated. Deutsche Bank AG, Credit Suisse Group AG, Barclays Plc, Societe Generale SA and Royal Bank of Scotland Group Plc dropped at least 5 percent. HSBC Holdings Plc fell 1.3 percent. The Markit iTraxx Financial Index of default swaps linked to senior debt of 25 banks and insurers soared 14 basis points to 259 basis points.
Clariant Tumbles
Clariant AG (CLN) tumbled 13 percent, for the biggest decline on the Stoxx 600, after the chemical maker cut its sales and profit-margin projections for this year. Futures on the Standard & Poor’s 500 Index expiring this month slid 0.7 percent.
The extra yield investors demand to hold Italian 10-year bonds instead of benchmark bunds climbed 16 basis points to the most since Aug. 8. The yield on the Greek two-year note jumped 42 basis points to 47.62 percent, a euro-era high. The bund yield dropped seven basis points to 1.93 percent.
Italian Prime Minister Silvio Berlusconi is facing a general strike tomorrow as he seeks parliamentary backing for a 45.5 billion-euro ($65 billion) austerity plan.
The euro depreciated 0.4 percent to $1.4143, the weakest level since Aug. 11. The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced for the fifth day to the highest level in a month. The Swiss franc strengthened 0.7 percent versus the euro and 0.3 percent against the dollar, while the yen appreciated against all but one of its 16 major counterparts.
Emerging Markets
The MSCI Emerging Markets Index dropped 2.3 percent, the most since Aug. 19. South Korea’s Kospi Index (KOSPI) retreated 4.4 percent, more than any other bourse in the world. The Shanghai Composite Index slid 2 percent after a measure of Chinese services dropped to a record low. Benchmark gauges in Poland and Hungary fell at least 1 percent.
Gold climbed 0.5 percent to $1,892.15 an ounce. Oil in New York fell 1.3 percent to $85.30 a barrel and copper declined 0.6 percent in London.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net;
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
