By David Merritt April 22 (Bloomberg) -- Stocks fell, the euro dropped and the cost of insuring Greek debt soared to a record as the euro area’s budget deficit widened to more than double the European Union’s limit. The MSCI World Index declined 0.5 percent at 10:47 a.m. in London and the euro retreated against 12 of its most-traded counterparts. Greek bonds fell, increasing the yield premium investors demand to hold the nation’s 10-year bonds instead of benchmark German bunds to 535 basis points. Futures on the Standard & Poor’s 500 Index dropped 0.5 percent. The total budget shortfall for the 16-nation euro region widened to 6.3 percent of gross domestic product last year, the biggest since the introduction of the euro in 1999, the EU’s Luxembourg-based statistics office said. The International Monetary Fund, which yesterday raised its forecast for global growth in 2010, cautioned that a failure to contain public debt might have “severe” consequences for the world economy. “Credit sentiment has deteriorated markedly because of concerns about the long-term health of highly indebted euro zone governments, which has triggered widespread speculation about Greek debt restructuring, and the impact on bank capital from deteriorating sovereign risk exposure,” Lena Komileva, an economist at Tullet Prebon Plc in London, wrote in a report. Greece’s ASE Index of stocks dropped 1.7 percent and the cost of insuring the nation’s debt for a year surged 105 basis points to a record 745, according to CMA DataVision, amid mounting concern the government will cut or delay payments to bondholders. The country’s budget deficit was 13.6 percent of gross domestic product in 2009, Eurostat said today. Banking Stocks Drop “Look out for signs that the government might offer a voluntary debt-restructuring arrangement sometime over the next few months,” Erik F. Nielsen, chief European economist at Goldman Sachs Group Inc. in London, wrote in a report. Banking stocks led the decline in European shares, with Piraeus Bank SA retreating 4.9 percent and Allied Irish Banks Plc dropping 3.2 percent. Ireland overtook Greece as the EU nation with the largest deficit last year, with its deficit revised up to 14.3 percent, Eurostat said. Credit Suisse Group AG, Switzerland’s second-biggest bank, fell the most in more than two months after missing a gain in debt trading that helped lift earnings at rivals. The MSCI Emerging Markets Index fell for the first time in three days, dropping 0.2 percent. Poland’s WIG20 Index sank 0.5 percent, erasing an early gain after the EU’s budget report. Developing-nation currencies weakened against the dollar, led by a 1 percent drop in South Africa’s rand. Fewer Mortgages The MSCI Asia Pacific Index declined 0.6 percent, on concern a stronger yen and Chinese measures to curb property prices will damp earnings in the region. Sony Corp. lost 2.1 percent in Tokyo. Bank of Communications Ltd., China’s fourth- largest publicly traded lender, slumped 4.9 percent in Shanghai after saying it made fewer mortgages the past two months. The drop in U.S. futures indicated the S&P 500 may extend yesterday’s 0.1 percent decline. President Barack Obama will take aim at “risky decisions” made on Wall Street in a speech scheduled to begin at 11:55 a.m. today in New York intended to build momentum for legislation to overhaul U.S. financial regulations, his spokesman said. A report from The National Association of Realtors scheduled for 10 a.m. in Washington may show sales of previously owned homes in the U.S. rose in March for the first time in four months, economists said. Inflation Contained A report from the Labor Department at 8:30 a.m. may show initial jobless claims dropped last week to 450,000 from 484,000 the prior week, according to the survey. A separate report from the Labor Department at the same time may show inflation is contained, with wholesale costs excluding food and fuel rising 0.1 percent in March for a second month, the survey showed. About 87 percent of S&P 500 companies that have reported first-quarter results beat the average analyst earnings estimate, according to data compiled by Bloomberg, which would mark a record proportion in data going back to 1993. Philip Morris International Inc., PepsiCo Inc. and Verizon Communications Inc. are among 42 companies on the benchmark gauge scheduled to report earnings today. Copper for delivery in three months fell 0.3 percent to $7,733.50 a metric ton on the London Metal Exchange, erasing an earlier gain of as much as 0.6 percent. Platinum for immediate delivery rose 0.3 percent to $1,738.15 an ounce, after earlier adding as much as 1.3 percent. Crude oil for June delivery fell 0.6 percent to $83.22 a barrel in New York. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net

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