SF: Stocks Decline on U.S. Budget Concerns; Treasuries, Yen Advance
Dec. 21 (Bloomberg) -- Stocks fell around the world, Treasuries gained and the yen strengthened against all its major peers after House Republican leaders scrapped a plan to allow higher taxes as budget talks stalled. Commodities declined.
The MSCI All-Country World Index dropped 0.4 percent at 11:43 a.m. in London. Standard Poor’s 500 Index futures slumped 1.3 percent, after plunging as much as 3.4 percent. The Stoxx Europe 600 Index slid 0.6 percent, falling from a 19-month high. The yield on 10-year Treasuries decreased three basis points to 1.77 percent. The yen climbed 0.3 percent, while the euro weakened 0.3 percent. The S&P GSCI gauge of 24 commodities lost 0.4 percent and oil in New York falling 1.1 percent.
House Speaker John Boehner yielded to anti-tax resistance within his own party, adding to concern that Republicans and Democrats will fail to agree on next year’s budget. House members and senators won’t vote on budget issues until after Christmas, giving them less than a week to prevent tax increases and spending cuts -- the so-called fiscal cliff -- from taking effect in January. A Commerce Department report today will show that durable-goods orders increased at a slower pace last month.
“The cliff clock continues to tick and a deal before the Christmas break is now looking increasingly unlikely,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a research note. “This uncertainty is pressurizing markets.”
Stocks Slide
The Stoxx Europe 600 Index retreated 0.6 percent, sliding from its highest level since May 2011. ArcelorMittal, the world’s biggest steelmaker, dropped 2.6 percent after saying it will write down the goodwill for its European businesses by about $4.3 billion.
The equity benchmark has still soared 15 percent this year, its biggest annual rally since 2009. European stock trading may be more volatile than usual as futures and options contracts expire in a process known as quadruple witching.
Boehner called on President Barack Obama and Senate Majority Leader Harry Reid to come up with legislation to stop more than $600 billion of additional taxes and spending cuts from coming into force. The Congressional Budget Office has said that failing to avoid the fiscal cliff would probably lead to a recession in the first half of 2013.
“The president’s main priority is to ensure that taxes don’t go up on 98 percent of Americans and 97 percent of small businesses in just a few short days,” White House spokesman Jay Carney said in a statement. “We are hopeful that we will be able to find a bipartisan solution quickly.”
Dollar Index
Intercontinental Exchange Inc.’s Dollar Index, which tracks the currency against those of six major U.S. trading partners, snapped a five-day decline, rising 0.2 percent to 79.407. It reached 79.01 on Dec. 19, the lowest level since Oct. 18.
South Africa’s rand weakened against most its major peers. The rand slipped 1 percent to 8.5580 per dollar.
The yen has tumbled 12 percent this year, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has weakened 3.3 percent and the euro has dropped 1.1 percent.
The yen strengthened 0.3 percent to 84.16 per dollar. The U.S. currency added 0.3 percent to $1.3207 per euro.
Nickel Retreats
Nickel slid 0.2 percent. The S&P GSCI gauge of commodities has slipped 0.6 percent this year, heading for its first annual decline since 2008.
U.S. oil futures declined the most in more than two weeks on concern U.S. lawmakers may fail to resolve budget talks.
West Texas Intermediate crude for February delivery fell 97 cents to $89.16 a barrel on the New York Mercantile Exchange, declining more than Brent crude. Goldman Sachs Group Inc. commodity analysts yesterday stepped away from a previous forecast that the spread between the two grades would narrow to $4 a barrel within three months. They now target $14. The gap today is about $20.50.
The cost of insuring corporate debt climbed from a 17-month low, with the Markit iTraxx Europe index of credit-default swaps linked to 125 investment grade companies rising two basis points to 111.5 basis points.
Emerging-market stocks fell for a second day on concern U.S. budget talks will fail, threatening the outlook for exporters’ earnings. The MSCI Emerging Market Index slid 0.9 percent to 1,043.4, its biggest drop in more than three weeks. China’s stocks retreated from a four-month high on concern that the rally from the beginning of this month was excessive. The Shanghai Composite Index fell 0.7 percent. India’s Sensex slid 1.1 percent.
--With assistance from Michael Shanahan, Stephen Voss, Emma Charlton, Mark Gilbert and Claudia Carpenter in London. Editors: Will Hadfield, Stuart Wallace
To contact the reporters on this story: Will Hadfield in London at whadfield@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
