BLBG:Stocks, Euro Decline as Default Risk Increases
Stocks (MXWD) fell, the euro weakened for a fifth day and commodities declined as Europe’s leaders remained divided over a Greek rescue and Moody’s Investors Service said it may downgrade global banks. The cost of insuring government debt against default rose to a one-month high.
The Stoxx Europe 600 Index lost 0.6 percent, led by banks, at 6:30 a.m. in New York. Standard & Poor’s 500 Index futures sank 0.3 percent. The euro declined to less than $1.30 for the first time since Jan. 25 and Spanish 10-year bonds dropped for a third day, sending the yield five basis points higher. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose for a seventh day, its longest run of increases since November 2010. The S&P GSCI gauge of 24 commodities slid 0.4 percent as copper fell to a three-week low.
Europe’s creditor countries struggled to bridge divisions over a rescue of Greece yesterday, delaying a decision on 130 billion euros ($170 billion) of aid until Feb. 20. Ratings for global banks may be cut as lenders worldwide face risks of rising funding costs amid Europe’s debt woes, Moody’s said. Spain sold 4.07 billion euros of debt maturing in 2015 and 2019, more than the 4 billion-euro maximum target.
“Greek concerns appear to be weighing down on markets,” said Peter Dixon, global equities economist at Commerzbank AG. “It’s beginning to look as though the end game may be a lot more messy than anticipated.”
Ban Lifted
More than four shares declined for every one that rose in the Stoxx 600. Spanish banks led losses as regulators lifted a six-month ban on short-selling the nation’s lenders. Banco Santander SA lost 3.9 percent, the most in six weeks. Banco Bilbao Vizcaya Argentaria SA and Bankia SA retreated more than 5 percent.
Societe Generale SA sank 3.4 percent in Paris after France’s second-largest bank said fourth-quarter profit declined 89 percent as the investment bank posted its first loss in two years. Zurich Financial Services AG slid 1.8 percent as Switzerland’s biggest insurer said fourth-quarter profit tumbled 45 percent after losses from Thai floods and other natural disasters.
Ratings for UBS AG, Credit Suisse Group AG and Morgan Stanley may be lowered by as many as three levels, while those for Goldman Sachs Group Inc. (GS), Deutsche Bank AG, JPMorgan Chase & Co. and Citigroup Inc. may be cut two levels, Moody’s said in a statement.
Housing Starts
The decline in S&P 500 futures indicated the U.S. equities gauge will retreat for a third day. A government report at 8:30 a.m. in Washington may show U.S. builders broke ground on more houses in January, indicating the residential real estate market is stabilizing.
Housing starts climbed 2.7 percent to a 675,000 annual rate, according to the median estimate of 79 economists surveyed by Bloomberg. Building permits, a proxy for future construction, may have climbed 1.3 percent. Other data may show manufacturing in the Philadelphia area accelerated, jobless-benefit claims increased and higher fuel costs drove up wholesale prices.
The euro slid 0.5 percent to $1.3005, after falling to $1.2983. The Dollar Index, which tracks the U.S. currency against six trading partners, rose 0.4 percent.
The gauge of default swaps on government debt climbed 10.5 basis points to 355.5, the highest since Jan. 18, while the Markit iTraxx Financial Index linked to the senior debt of 25 European banks and insurers rose six basis points to a month- high of 249. The measure dropped 58 basis points in January, a record monthly decline.
The difference in yield investors demand to own Spain’s 10- year bonds compared with Germany benchmark bunds increased 15 basis points. The yield spread between French bonds and the bund rose 2.5 basis points. France sold 8.45 billion euros of debt at lower borrowing costs.
Commodities Drop
Oil in New York fell 0.5 percent to $101.31 a barrel and copper dropped as much as 1.6 percent to $8,233 a metric ton, the lowest price since Jan. 23.
The MSCI Emerging Markets Index (MXEF) fell 1.4 percent, set for the lowest close since Feb. 10. Taiwan’s Taiex index and South Korea’s Kospi Index lost at least 1.4 percent. Catcher Technology Co. (2474) and Foxconn Technology Co., which make casings for Apple Inc.’s iPhones, slumped more than 6 percent in Taipei after Apple shares lost 2.3 percent yesterday. The Shanghai Composite Index (SHCOMP) retreated 0.4 percent. The Czech PX Index fell 1.6 percent as Erste Group Bank AG and Komercni Banka AS led losses. Benchmark indexes in Russia, Hungary and South Africa dropped at least 0.9 percent.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net
