BLBG:Stocks Fall as Yen, Bonds Rise on Syria; Oil, Gold Gain
Stocks fell for a second day, the yen strengthened and bonds rose after U.S. Secretary of State John Kerry said Syria will be held accountable for using chemical weapons. Turkey’s lira and India’s rupee weakened to records while oil and gold advanced.
The MSCI All-Country World Index dropped 0.5 percent to 369.15 at 7:53 a.m. in New York as Standard & Poor’s 500 Index futures fell 0.6 percent. Japan’s currency appreciated at least 0.5 percent versus all 31 of its major counterparts and bonds rose. The lira tumbled past 2 per dollar for the first time and the rupee sank to 66.19 versus the dollar. Thailand’s benchmark equity gauge entered a bear market. West Texas Intermediate crude climbed 1.7 percent to $107.73 a barrel and gold climbed 0.7 percent to $1,414.10 an ounce.
Kerry said President Barack Obama believes there must be accountability for the “moral obscenity” of using chemical weapons, fanning concern unrest may disrupt Middle East oil supplies. An Ifo institute report today showed German business confidence rose for a fourth month in August, before data on U.S. housing and consumer confidence.
“For anyone who thought that the Arab Spring was going to be a temporary situation, it’s proven to not be the case,” Erik Wytenus, Hong Kong-based head of foreign exchange and commodities at JPMorgan Private Bank in Asia, said on Bloomberg Television’s “On the Move” with Rishaad Salamat. “You’ve got a bit of short-term, safe haven, flight-to-quality bid. Emerging markets are being punished by severe capital outflows, which are hitting their currencies inordinately hard.”
Potential Response
Kerry didn’t say whether the U.S. would seek a mandate from the UN for potential responses. Russia, an ally of Syria that has a veto on the UN Security Council, has blocked previous UN action against Syria. Iran, another Syrian ally, has warned that a military strike against Syria will have “great consequences for the region,” Foreign Ministry spokesman Abbas Araghchi told reporters in Tehran today.
Prime Minister Helle Thorning-Schmidt said Denmark may circumvent the UN and U.K. Foreign Secretary William Hague said yesterday that a response would be legal even without the full backing of the UN Security Council.
The Stoxx Europe 600 Index lost 1.2 percent, the biggest drop in a week, as all 19 industry groups retreated. Trading was 19 percent higher than the 30-day average, according to data compiled by Bloomberg.
Polymetal International Plc (POLY) plunged 6.6 percent as HSBC Holdings Plc downgraded its recommendation on the Russian gold and silver miner part-owned by billionaire Alexander Nesis.
U.S. Stocks
S&P 500 futures indicated the gauge will fall for a second day. The Conference Board is due to release its U.S. consumer confidence index at 10 a.m. New York time. The gauge fell to 79 this month from 80.3 in July, according to the median forecast in a Bloomberg survey of 71 economists. The S&P/Case-Shiller measure may show house prices climbed 12.1 percent in June from a year earlier, following a 12.2 percent gain in May, a separate survey showed.
The MSCI Emerging Markets Index fell the most in a week, dropping 1.3 percent. The Philippine Stock Exchange Index tumbled 4 percent amid protests over government spending and the Thai SET Index slumped 2.7 percent, extending declines from this year’s peak to more than 20 percent. The Sensex Index sank 3.2 percent in Mumbai as the rupee dropped to 66.0775 per dollar. The Jakarta Composite index retreated 3.7 percent and the rupiah dropped 0.7 percent to a four-year low.
Joining Coalition
The lira slid as much as 1.9 percent to 2.0336 per dollar and the benchmark equity gauge slipped 2.9 percent. Turkey will join a coalition against Syria if the United Nations fails to take action after allegations that forces loyal to Syrian President Bashar al-Assad used chemical weapons, Milliyet newspaper reported, citing Foreign Minister Ahmet Davutoglu.
The yen advanced for a second day, strengthening 0.8 percent to 97.75 per dollar as investors sought the currency as a refuge. Against the euro, it rallied 0.9 percent to 130.50 yen. The 17-nation shared currency slid 0.2 percent to $1.3347.
Australia’s dollar weakened 0.8 percent to 89.59 U.S. cents.
Ten-year Treasuries rose for a fourth day, pushing the yield two basis points lower to 2.77 percent. The U.S. will hit the $16.7 trillion debt ceiling in mid-October, Treasury Secretary Jacob J. Lew said, urging Congress to raise the limit “as soon as possible.”
Debt Sales
The U.S. government is scheduled to sell $34 billion of two-year notes today, the first of three auctions totaling $98 billion this week.
The rate on 10-year German bunds dropped three basis points to 1.87 percent and the 10-year gilt yield tumbled 11 basis points to 2.61 percent.
The cost of insuring against losses on corporate bonds rose, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies increasing 2.5 basis points to 103.2 basis points, the highest since Aug. 21.
Brent jumped 1 percent to $111.88 a barrel. The Middle East accounted for 35 percent of global oil output in the first quarter of this year, according to data from the International Energy Agency.
Soybeans slipped 0.3 percent after gaining 4.6 percent yesterday on speculation of crop damage from hot, dry weather in the U.S. Midwest. Wheat dropped 0.5 percent after rallying 3.2 percent yesterday. Corn declined 0.6 percent after jumping 6.5 percent yesterday.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net
