Stocks and commodities fell after the Federal Reserve refrained from taking more steps to boost the economy, while U.S. index futures erased gains. The euro weakened to less than $1.30 for the first time since January.
The MSCI All Country World Index lost 0.6 percent at 6:45 a.m. in New York, and the Stoxx Europe 600 Index retreated 0.9 percent. Standard & Poor’s 500 Index futures fell 0.1 percent, after climbing 0.5 percent. The euro depreciated to as low as $1.2995, the lowest since Jan. 12. Italy’s five-year bond yield fell nine basis points to 6.70 percent after the government sold the amount of debt it planned at an auction. The cost of insuring against default on European sovereign debt approached a record. Oil declined 0.8 percent and copper dropped 2 percent.
Chancellor Angela Merkel is due to address Germany’s parliament today on the rescue package announced by European leaders for the region last week. The Fed said yesterday that the U.S. is maintaining growth even as the global economy slows, disappointing investors who expected a third round of asset purchases. The Munich-based Ifo institute cut its 2012 economic growth forecast for Germany, Europe’s largest economy, to 0.4 percent from 2.3 percent today.
“There’s a potential for further downside,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversees about $326 billion of assets globally. “The magnitude of this crisis compared to the one in 2008 is bigger as it includes sovereign risks as well. Policy makers have probably exhausted their fiscal and monetary policy options and they are running out of bullets.”
Lower Forecast
Seven stocks (MXWD) declined for every one that gained in the Stoxx 600. Logica Plc (LOG) plunged 17 percent, the most since August, as the Anglo-Dutch computer-services provider accelerated a reorganization after customers cut spending amid a “tougher” economy. Inditex SA gained 3.5 percent as the world’s largest clothing retailer reported increased profit.
Italy’s 10-year yield increased one basis point. The government sold 3 billion euros ($3.9 billion) of five-year bonds at an average yield of 6.47 percent, up from 6.29 percent on Nov. 14. German two-year yields rose two basis points to 0.298 percent as the government auctioned 4.18 billion euros of the securities at an average yield of 0.29 percent.
The Markit iTraxx SovX Western Europe Index of credit- default swaps rose three basis points to 382, three basis points short of an all-time high. Corporate-swaps indexes also climbed, with the Markit iTraxx Europe Index of contracts linked to 125 investment-grade companies increasing three basis points to 187.5, the highest level in two weeks.
Treasury Auction
Treasury 30-year yields were little changed at 3.02 percent before the nation sells $13 billion of the debt. A three-year sale drew record demand on Dec. 12 and bidding increased at a 10-year auction yesterday as investors sought a haven from Europe’s debt crisis.
The euro traded at $1.3004. The Norwegian krone strengthened versus 13 of 16 major peers tracked by Bloomberg before the central bank announces an interest-rate decision today. Norges Bank will lower its overnight deposit rate to 2 percent from 2.25 percent, according to a survey of economists, the first cut in more than two years.
Oil in New York declined to $99.38 a barrel on speculation the Organization of Petroleum Exporting Countries will set an output ceiling near current production levels at a meeting in Vienna today.
The MSCI Emerging Markets Index (MXEF) fell 0.7 percent, declining for a fifth day. China’s Shanghai Composite Index (SHCOMP) retreated 0.9 percent after the Conference Board’s October leading indicator index for the country fell 0.1 percent. Getin Holding SA (GTN), a Polish financial-services group, led the WIG20 Index (WIG20) 0.4 percent higher after agreeing to sell a stake in Europa SA to Germany’s Talanx International AG and Japan’s Meiji Yasuda Life Insurance.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
