BLBG:Euro Weakens With Asian Stocks as Aussie Touches Low
Stocks, commodities and the euro dropped as European finance ministers prepared to meet to discuss the region’s debt crisis. The yen strengthened and Chinese shares fell after the World Bank forecast slowing growth in East Asia.
The MSCI All-Country World Index retreated as much as 0.6 percent at 11:17 a.m. London time, and futures on the Standard & Poor’s 500 Index lost 0.5 percent. The euro weakened and the yen strengthened against all their major peers and the rand dropped to the lowest since April 2009. China’s Shanghai Composite Index slipped on the first day of trading after a week-long holiday. Yields on German 10-year notes declined 3 basis points. U.S. Treasuries weren’t trading because of the Columbus Day holiday. Silver led the S&P GSCI gauge of 24 commodities lower.
European finance ministers will meet in Luxembourg to discuss Spain’s finances and closer banking cooperation, while German Chancellor Angela Merkel visits Greece tomorrow for the first time since the crisis erupted. Growth in developing East Asia will probably slide to an 11-year low of 7.2 percent this year, the World Bank estimates. Alcoa Inc. (AA) unofficially starts the U.S. earnings season with the release of its third-quarter numbers tomorrow, the fifth anniversary of the record highs in the S&P 500 and Dow Jones Industrial Average.
“There are a lot of uncertainties ahead of us and the economy is very concerning, especially in Italy and Spain,” Fabrice Seiman, co-chief executive officer of Lutetia Capital, said from Paris in an interview on Bloomberg Television’s “The Pulse” with Caroline Hyde. “The market rally has been very good for Europe but right now is the time to take your profits.”
Stocks Drop
The Stoxx 600 fell 0.9 percent as all 19 industry groups retreated. Cookson Group Plc (CKSN), a British supplier of materials to the steel and glass industry, plunged 14 percent after predicting its annual performance will be “materially” below its target. Michael Page International Plc retreated 3 percent as the U.K. recruitment company said full-year profit will trail analyst estimates.
Eurobank Ergasias SA surged 8.6 percent in Athens as National Bank of Greece SA offered to acquire its domestic rival as Greece’s debt crisis forces a wave of mergers. National Bank also rallied 11 percent.
The decline in S&P 500 futures indicated the U.S. equities gauge will pare last week’s 1.4 percent rally. Earnings at companies in the S&P 500 (SPX) are projected to fall 1.7 percent in the third quarter, according to more than 11,000 analyst forecasts compiled by Bloomberg.
Earnings Season
“Speculation that the third-quarter earnings session will be poor is causing a risk-off tone to wash over market sentiment this morning,” Jane Foley, a senior currency strategist at Rabobank International in London, said in an e-mailed report.
The euro depreciated 1.2 percent to 101.35 yen and weakened 0.6 percent to $1.269. Ministers from all 27 nations in the European Union meet tomorrow while Spanish Prime Minister Mariano Rajoy will travel to Paris on Oct. 10 for talks with French President Francois Hollande.
The rand weakened 1.9 percent to 8.9426 per dollar, the lowest level since April 27, 2009, as strikes in South Africa’s mining and transportation industries spread to other sectors of the economy.
Japan’s currency strengthened against all its major counterparts, appreciating 0.4 percent to 78.33 yen per dollar.
The yield on Germany’s 10-year bond fell to 1.49 percent. The nation’s industrial production in August declined 0.5 percent from July, the Economy Ministry in Berlin said today. Economists had forecast a drop of 0.6 percent, according to a Bloomberg News survey.
Asian Stocks
Australia’s dollar retreated earlier to the lowest since July 13 amid speculation that the Reserve Bank will reduce its key interest rate next month following a cut last week. Treasurer Wayne Swan said yesterday that reduced borrowing costs will help Australia weather deteriorating conditions in the world economy.
The Shanghai Composite Index (SHCOMP) dropped 0.6 percent as data signaling slowing growth outweighed an increase in tourism sales during the so-called Golden Week holiday that ended Oct. 5. Russia’s Micex slumped 1 percent as oil futures dropped.
“During the previous crisis back in 2009, China acted as an incredible counterweight to the western difficulties with this huge infrastructure boost,” said Stephen King, chief economist at HSBC Holdings Plc. “We’re not seeing this same kind of boost from China this time around. Everyone exposed to southern Europe is not benefiting from a China boom and that’s really hitting world trade.”
Silver Slumps
Silver led commodities lower, falling 1.8 percent, while gold declined 0.7 percent to $1,768.75 an ounce. West Texas Intermediate oil in New York slipped 1.1 percent to $88.86 a barrel and copper dropped 1.6 percent to $8,166 a metric ton on the London Metal Exchange. Futures for gasoline fell 0.2 percent to $2.9467 a gallon.
Pump prices in California rose to an average $4.668 a gallon, 22 percent higher than the U.S. average, according to data today from AAA, the nation’s largest motoring organization. Governor Jerry Brown directed state regulators to relax smog controls so refineries can increase supplies of cheaper fuel.
To contact the reporters on this story: Rachel Graham in London at rgraham13@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
