Stocks dropped and commodities declined to the lowest level since November 2010 as reports on manufacturing in Germany and China signaled output is shrinking and the Federal Reserve cut growth estimates. The euro weakened, while Spanish bonds stayed higher after an auction. The MSCI All-Country World Index (MXWD) fell 0.4 percent at 9:42 a.m. in London. Standard & Poor’s 500 Index futures slid 0.4 percent. Chinese stocks sank to the lowest level since March. Spain’s two-year yield dropped 11 basis points to 4.90 percent. The euro depreciated 0.3 percent to $1.2666. The S&P GSCI gauge of 24 commodities is down more than 20 percent from the closing high in February, the common definition of a bear market. Oil sank below $80 a barrel, the first time in eight months. German manufacturing contracted more than economists forecast in June, while China’s factory output is seen shrinking for an eighth month, according to purchasing managers’ indexes from Markit Economics and HSBC Holdings Plc. Fed officials cut their estimate for economic growth in 2012 to 1.9 percent to 2.4 percent and extended stimulus known as Operation Twist. Spain sold 2.22 billion euros ($2.8 billion) of bonds, compared with a maximum target of 2 billion euros. “Even though markets are cheap, we’re not back to a risk- on mode,� said Andrew Pease, Sydney-based chief investment strategist at Russell Investment Group, which manages about $150 billion. “Risks in Europe are not over by a long way.� The Stoxx Europe 600 (SXXP) Index lost 0.4 percent, snapping a four-day rally that had driven the gauge to the highest level in six weeks. Kazakhmys Plc and Vedanta Resources Plc led a decline in mining companies, retreating more than 4 percent. Invensys Plc (ISYS) plunged 17 percent after the British maker of software and meters said takeover talks with Emerson Electric Co. and other potential suitors ended without agreement. Home Sales The decline in S&P 500 futures indicated the U.S. equity index will fall for a second day. Philip Morris International Inc. slipped 2 percent in German trading as the world’s largest tobacco company cut its 2012 earnings forecast because of movements in foreign-exchange rates. A report today may show sales of previously owned U.S. homes fell 1.1 percent to a 4.57 million annual rate last month, according to the median projection of 74 economists surveyed by Bloomberg. Other data are forecast to show jobless-benefit claims were little changed last week, manufacturing in the Philadelphia region was stagnant in June and an index of U.S. leading indicators climbed in May. The Spanish 10-year bond yield dropped seven basis points. Greek Cabinet The yield on the Greek February 2023 security tumbled 28 basis points to 26.89 percent, with the price rising to 16.68 percent of face value. Greek Prime Minister Antonis Samaras is set to announce the members of his government today after securing agreement from the country’s political leaders on a coalition that will seek relief from austerity measures tied to international loans. The 17-nation European currency depreciated 0.3 percent against the yen, while the Dollar Index, which tracks the U.S. currency against those of six trading partners, rose 0.3 percent, advancing for the second consecutive day. The New Zealand dollar strengthened against all 16 major peers after a report showed the economy grew at the fastest pace in five years in the first quarter, prompting investors to reduce bets the central bank will cut interest rates. The GSCI gauge of commodities fell 1.2 percent today. New York oil dropped as much as 1.9 percent to $79.92 a barrel, the lowest intraday price since Oct. 6. The MSCI Emerging Markets Index (MXEF) fell 1.1 percent, the most since June 4. The Shanghai Composite Index (SHCOMP) slumped 1.4 percent. Russia’s Micex Index slid 0.7 percent and Hungary’s BUX Index (BUX) tumbled 1.3 percent. To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net

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