BS: Stocks Fall With S&P 500 Futures, Italy Bonds; Yen Gains
Stocks and U.S. equity-index futures (SPX) fell amid escalating tension over Ukraine while Italian bonds tumbled as the country unexpectedly slipped back into a recession. Treasuries and gold rose while the yen strengthened on demand for haven assets.
The Stoxx Europe 600 Index lost 1.3 percent by 8:21 a.m. in New York. Standard & Poor’s 500 Index futures slipped 0.4 percent, signaling the gauge will extend yesterday’s decline to a two-month low. Italy’s 10-year yield increased four basis points to 2.79 percent while the rate on Treasuries fell four basis points to 2.44 percent and the German bund yield dropped to a record. Corporate credit risk in Europe climbed to the highest level since May. The yen strengthened against all of its 16 major peers and Russia’s ruble weakened 0.3 percent against the dollar. Gold jumped 0.7 percent.
NATO said there’s a risk of Russia sending troops into Ukraine under the “pretext” of a humanitarian mission after President Vladimir Putin massed troops on his country’s western border. Italy’s economy contracted 0.2 percent in the second quarter and German factory orders fell the most since September 2011 in June, reports showed. Sprint Corp. and Time Warner Inc. slid on merger news.
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“People are taking risk off,” Kevin Lilley, who helps manage the equivalent of $27 billion as head of European equities at Old Mutual Global Investors U.K. Ltd., said by telephone from London. “We’ve got big geopolitical events going on. At the same time, some of the U.S. data has improved bringing forward people’s expectations of rate rises.”
U.S. service industries grew at the fastest pace since 2005, bolstering the case for raising borrowing costs, data indicated yesterday.
Deutsche Telekom
All 19 industry groups in the Stoxx 600 declined, with trading volumes 39 percent higher than the 30-day average, according to data compiled by Bloomberg. Italy’s benchmark stock gauge lost 2.6 percent.
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Deutsche Telekom AG lost 2.8 percent after people familiar with the talks said T-Mobile US Inc. plans to turn down Iliad SA’s $15 billion deal proposal. The German company holds 67 percent of T-Mobile. Iliad declined 3.5 percent.
Swiss Re AG slipped 3.1 percent after posting second-quarter earnings that fell short of analysts’ estimates.
Ageas SA advanced 2 percent after the Belgian insurer that emerged from the 2008 collapse of Fortis agreed to sell its U.K. Ageas Protect to American International Group Inc.
Futures on S&P 500 signaled the gauge will extend yesterday’s 1 percent drop to the lowest close since May 29.
Time Warner
Sprint slid 14 percent in pre-market trading after a person with knowledge of the matter said the company ended talks to buy T-Mobile US Inc. Time Warner lost 13 percent Rupert Murdoch’s 21st Century Fox Inc. withdrew its unsolicited bid.
Groupon Inc. tumbled 17 percent after the company forecast earnings that missed analyst estimates.
Prudential Financial Inc. is among S&P 500 companies reporting earnings today. About 75 percent of those that have posted results this season have beaten analysts’ estimates for profit, while 64 percent exceeded sales projections, according to data compiled by Bloomberg.
Profits at S&P 500 members probably rose 9.4 percent in the second quarter, while sales gained 4.2 percent, according to analyst estimates compiled by Bloomberg.
The MSCI Emerging Markets Index fell 0.8 percent as benchmark gauges in South Africa, Indonesia, Turkey, Hungary and Dubai lost at least 1 percent.
The ruble fell for a fifth day and the yield on 10-year bonds rose 16 basis points to 9.86 percent, the highest since October 2009. Russia’s Micex Index slipped 1.7 percent. Ukraine’s July 2017 Eurobond fell for a fourth day, sending the yield up 40 basis points to 10.34 percent, the highest in more than two months.
Amassing Troops
Russia yesterday called for a humanitarian mission to Eastern Ukraine, which is on the verge of a “catastrophe,” the Foreign Ministry in Moscow said on its website.
Polish Foreign Minister Radoslaw Sikorski said yesterday any incursion would be under the guise of a peacekeeping operation. Russia has deployed 45,000 soldiers, 160 tanks and as many as 1,360 armored vehicles, Andriy Lysenko, a Ukrainian military spokesman, told reporters in Kiev yesterday.
