BLBG:Bond Yields Fall To Records As Stocks, Euro Slide On Debt
Government bond yields in the U.S., U.K. and Germany fell to records, while stocks dropped and the euro traded below its lifetime average against the dollar on concern the region’s debt crisis is deepening. Commodities slid as a Chinese central bank adviser said growth may slow further.
The yield on the 10-year U.S. Treasury note declined to an all-time low of 1.41 percent at 10:49 a.m. London time, while two-year German yields slumped to minus 0.08 percent and Spanish and Italian yields jumped. The MSCI All-Country World Index (SPX) and futures on the Standard & Poor’s 500 both fell 1.1 percent. The euro fell for a fourth day, sliding 0.4 percent to $1.2109. Oil fell the most in a month. Credit-default swaps on Spain rose 30 basis points to an all-time high of 635.
There is “heightened investor concern over the escalating euro-zone sovereign debt crisis,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote today in an e-mailed report. “European authorities are still failing to at least stabilize investor confidence in euro-zone sovereign debt, with Spanish government bond yields rising to new post-euro-zone record highs.”
Greece’s creditors meet this week amid doubts that the country will meet its bailout commitments. German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months to September, said Song Guoqing, a member of the People’s Bank of China monetary policy committee.
Euro Declines
Germany’s two-year note yield was below zero for the 12th consecutive day and Spain’s 10-year yields surged 22 basis points to 7.49 percent, after El Pais reported that six Spanish regions may ask for aid from the central government. U.S. five- year yields touched an all-time low of 0.54 percent, while 30- year rates also slumped to records. U.K. two-year yields dropped to an unprecedented 0.05 percent, and Norwegian five-year note yields fell to 1.17 percent for the first time.
The euro weakened 1 percent to 94.5 yen after touching 94.24, the lowest since November 2000. It dropped as much as 0.6 percent to $1.2082, a level unseen since June 2010. The Australian and New Zealand dollars fell at least 0.9 percent as growth concerns reduced demand for riskier assets.
The Stoxx Europe 600 Index (SXXP) lost 2 percent as a gauge of banks retreated to a six-week low. Banco Santander SA, Spain’s largest lender, dropped 4.6 percent and Italy’s UniCredit SpA slid 7.1 percent. Wereldhave NV sank 14 percent, the most since 1989, after the Dutch real-estate company cut the value of property in the U.S. and U.K.
U.S. Earnings
McDonald’s Corp., the world’s largest restaurant chain, releases results today. Earnings at U.S. companies have exceeded analyst estimates at about 73 percent of the 118 S&P 500 companies that reported quarterly results so far, according to data compiled by Bloomberg. While profits are up 0.4 percent for the group, sales rose an average 2.9 percent, the weakest since a drop of 0.6 percent in the third quarter of 2009.
The S&P 500 rose last week, posting its first back-to-back gain since June, as results from International Business Machines Corp. to Baker Hughes Inc. (BHI) beat forecasts and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus. U.S. consumer confidence and equity valuations are diverging the most in 17 years as price-earnings ratios fall, according to data compiled by Bloomberg.
U.S. gross domestic product, the value of all goods and services the nation produced, rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of 70 economists surveyed by Bloomberg News before a report on July 27. Factory orders softened and new-home sales were little changed, other data may show this week.
Corn, Soybeans
The S&P GSCI gauge of commodities dropped as much as 2.6 percent, the most in a month. Oil in New York was down 2.7 percent to $88.93 a barrel and nickel fell to the lowest price since July 2009. Copper slumped 2.1 percent. China is the biggest buyer of energy and industrial metals.
Bank credit risk deteriorated, with the Markit iTraxx Financial Index of credit-default swaps linked to senior debt of 25 lenders and insurers climbing 14 basis points to 299, the highest since June 6.
The MSCI Emerging Markets Index (MXEF) lost 2 percent, poised for the lowest close since July 12. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong tumbled 3.1 percent, the most since May 16. Benchmark indexes lost more than 1 percent in India, South Korea, Russia and Turkey.
Greek Aid
Roesler, who is Germany’s economy minister, told broadcaster ARD that Greece is unlikely to be able to meet its obligations under a euro-area bailout program as its troika of international creditors, the European Commission, the European Central Bank and the International Monetary Fund, hold talks this week in Athens. Should that be the case, the country won’t receive more bailout payments, Roesler said.
The IMF will stop paying further rescue aid to Greece, raising the likelihood the nation will become insolvent, Der Spiegel magazine reported, citing unidentified European Union officials. Data today may show an index of consumer sentiment in the euro region probably fell to minus 20 in July from minus 19.8 a month earlier, economists predicted in a Bloomberg survey.
To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
