Oct. 17 (Bloomberg) -- Global stocks and the euro fell, retreating after their best weekly gains in more than two years, as Germany damped expectations for a fast resolution to Europe's debt crisis and a report showed New York-area manufacturing shrank more than forecast.
The MSCI All-Country World Index slipped 0.1 percent at 9:31 a.m. New York time following last week's 5.4 percent rally. The Standard & Poor's 500 Index dropped 0.4 percent as Wells Fargo & Co. tumbled after reporting a drop in revenue. The euro, which strengthened 3.8 percent versus the dollar last week, weakened 0.8 percent. The yield on 10-year Spanish bonds advanced for a sixth day, adding six basis points to 5.30 percent. Oil lost 0.4 percent at $86.43 a barrel in New York, reversing an earlier 1.6 percent advance.
Equities and the euro headed lower as Steffen Seibert, German Chancellor Angela Merkel's chief spokesman, said European Union leaders won't provide the quick ending to the debt crisis that global policy makers are pushing for at an Oct. 23 summit. Optimism that the region was developing a plan to shield banks from losses on sovereign debt propelled gains in stocks and the euro last week.
"It's optimism punctuated by reality," said Hayes Miller, the Boston-based head of asset allocation in North America at Baring Asset Management Inc., which oversees $51.6 billion. "It's not in the Germans' interest to offer up a bailout package on the terms that the market would like."
Retreat After Weekly Rally
The S&P 500 fell after last week's 6 percent jump, the steepest increase since July 2009. Wells Fargo retreated as the largest U.S. home lender reported a drop in third-quarter revenue and narrower margins. Citigroup Inc. reported profit that rose 74 percent, beating analysts' estimates following a $1.9 billion accounting gain that reduced the impact of falling trading and investment-banking revenue.
El Paso Corp. surged as Kinder Morgan Inc. agreed to buy the company for $21.1 billion in a deal that would create the largest U.S. natural-gas pipeline network.
International Business Machines Corp. will report earnings after the close of trading.
The Federal Reserve Bank of New York's general economic index rose to minus 8.5 from minus 8.8 in September. Economists projected an improvement to minus 4, based on the median of 53 forecasts in a Bloomberg News survey. Readings less than zero signal companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are cutting back.
European Stocks
About two stocks declined for each that gained in the Stoxx Europe 600 Index, which retreated after gaining for three straight weeks. Automobile companies led losses, with Daimler AG and Bayerische Motoren Werke AG down at least 1.9 percent. BP Plc appreciated 3.8 percent after saying Anadarko Petroleum Corp. will pay $4 billion to settle all claims over last year's oil spill in the Gulf of Mexico.
The yield on the Portuguese 10-year security rose 14 basis points to 11.79 percent, with seven days of losses in the bond driving the level up from 11.21 percent. The yield on the U.S. 30-year Treasury bond fell two basis points to 3.21 percent. The euro weakened to $1.3777 and was lower against 11 of its 16 most-traded peers.
Emerging Markets
The MSCI Emerging Markets Index increased 0.9 percent, on course for its ninth straight gain, the longest winning streak in 16 months. The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong climbed 2.8 percent and the Kospi Index jumped 1.6 percent in Seoul. Korea's won climbed 1.4 percent against the dollar.
South Korean Finance Minister Bahk Jae Wan said at the Paris meeting the Asian nation's economy is performing better than expected, while data tomorrow may show China's gross domestic product increased 9.3 percent in the third quarter from a year earlier, according to the median estimate of 22 economists surveyed by Bloomberg. That would be the ninth consecutive quarter of expansion above 9 percent.
The pound slipped 0.3 percent to $1.5775 as Ernst & Young LLP's ITEM Club cut its U.K. growth forecast and said the Bank of England should lower its key interest rate as its new stimulus earlier this month is unlikely to be enough to revive economic growth.
--With assistance from Shani Raja in Sydney, Shiyin Chen in Singapore and Claudia Carpenter, Will Hadfield, Michael Shanahan, Daniel Tilles and Jason Webb in London. Editor: Michael P. Regan
