Stocks dropped and an index of raw materials fell to a 10-month low as European leaders signaled they may renegotiate terms of Greece’s bailout. U.S. Treasuries, German bonds and the dollar gained. The MSCI All-Country World Index sank 1.5 percent at 9:30 a.m. in New York, with benchmark gauges in the U.K., Germany and France losing more than 2.8 percent. The Standard & Poor’s 500 Index slid 0.7 percent. Nickel, copper and oil helped lead the S&P GSCI index of 24 commodities 1.4 percent lower. The yield on the 10-year German bund decreased 12 basis points, its fourth straight decline, while the Dollar Index advanced 0.3 percent. European finance chiefs considered “technical revisions” for a second Greek bailout, Luxembourg Prime Minister Jean- Claude Juncker said today, fueling concern bondholders may have to take bigger losses. The possible breakup of Belgian bank Dexia SA (DEXB) and Deutsche Bank AG’s abandonment of its profit forecast added to signs that contagion from the debt crisis is spreading. Goldman Sachs Group Inc. cut its global growth forecasts and predicted recessions in Germany and France. “The rot has spread to every corner of the global markets,” said Bill Blain, co-head of strategy at Newedge Group, a London-based brokerage. “The taint of fear is dragging down most assets, with indecision running rife.” The S&P 500 slumped 2.9 percent yesterday to 1,099.23, the lowest since September 2010 and the exact closing level as on the same day three years ago. Goldman Sachs strategist David Kostin cut his forecasts for the S&P 500 for the next three, six and 12 months and lowered his earnings estimate for 2012 to $98 a share from $102, saying there is a 40 percent chance the U.S. economy will slip back into a recession. Factory Orders, Bernanke U.S. factory orders were little changed in August, after a 2.4 percent gain the prior month, according to the median of 68 economists’ forecasts in a Bloomberg survey. Federal Reserve Chairman Ben S. Bernanke is scheduled to testify today to a congressional panel about the economic outlook. Financial companies have led the S&P 500’s drop from a three-year high at the end of April, plunging more than 31 percent as a group through yesterday. Energy, commodity and industrial companies also tumbled more than 26 percent. Companies in the S&P 500 trade at 9.9 times 2012 forecast earnings, compared with the average in economic contractions since 1957 of 13.7, according to data compiled by Bloomberg. At the same time, analysts have cut projections for profits next year by 2.6 percent to $110.76 a share, the biggest eight-week decrease since 2009, the data show. $10 Trillion Lost About $10 trillion was wiped from global equity markets in the third quarter. As of yesterday, benchmark measures for 37 out of 45 nations in the MSCI All-Country World Index posted declines of 20 percent or more from their peaks, according to data compiled by Bloomberg. Besides the U.S., only two other developed markets --the U.K. and New Zealand -- hadn’t dropped 20 percent or more from their most-recent highs. The S&P 500 tumbled 14 percent in the third quarter, the worst drop since the three months ending December 2008. The Stoxx Europe 600 Index lost 17 percent in the third quarter. The Stoxx Europe 600 Index retreated 2.9 percent today as all 19 industry groups declined. Germany’s DAX Index dropped 3.5 percent, France’s CAC 40 declined 2.8 percent and the U.K.’s FTSE 100 slipped 2.8 percent. Greece’s ASE plunged 6 percent to the lowest since 1993. ‘Unabated Slowdown’ Deutsche Bank slumped 6.2 percent after also announcing 500 job cuts and further writedowns of Greek bond holdings amid a “significant and unabated slowdown in client activity.” Dexia, Belgium’s biggest bank by assets, tumbled 15 percent after its board asked the company to solve its “structural problems.” Dexia, BNP Paribas SA and Societe Generale SA are resisting pressure from regulators to accept more losses on their holdings of Greek government debt amid criticism they haven’t written down the bonds sufficiently. While most banks have marked their Hellenic debt to market prices, a decline of as much as 51 percent, France’s two biggest lenders and the Belgian bank cut the value of some holdings by 21 percent. The practice, which doesn’t violate accounting rules, may leave them vulnerable to bigger impairments in the event of a default, or if European governments force banks to accept bigger losses than signaled in July. The three would have about 3 billion euros ($4 billion) of extra losses if they took writedowns of 50 percent, data compiled by Bloomberg show. The yield on the Greek two-year note jumped 242 basis points to 64.69 percent, with the 10-year yield climbing 46 basis points to 23.09 percent. That drove the difference in yield over 10-year benchmark German bunds 58 basis points higher to 21.39 percentage points. ‘Technical Revisions’ As far as private sector involvement in a bailout is concerned, “we have to take into account that we have experienced changes since the decision we have taken on July 21,” Juncker told reporters today after chairing a meeting of euro finance chiefs in Luxembourg. “These are technical revisions we are discussing.” Italian 10-year debt yields fell three basis points, with two-year yields increasing five basis points. The European Central Bank bought Italian government securities today, according to three people with knowledge of the transactions. A spokeswoman for the ECB declined to comment. Credit-default swaps on Germany increased six basis points to 123.8 basis points, an all-time high, according to CMA. Swaps on banks also soared, with the Markit iTraxx Financial Index jumping 17 basis points to 306, according to JPMorgan Chase & Co. The record is 314 basis points, set on Sept. 12. The euro traded 0.1 percent higher at $1.3195, after declining to the lowest level since January. The dollar gained against 11 of its 16 major peers. Aussie Dollar Australia’s dollar slumped against all 16 most-traded peers tracked by Bloomberg, falling to the lowest level in more than a year versus the U.S. currency, after the nation’s central bank signaled it has scope to lower its benchmark interest rate. Governor Glenn Stevens held the overnight cash rate target at 4.75 percent, matching the prediction of all 22 economists surveyed by Bloomberg News. The GSCI index of 24 commodities fell as much as 2.2 percent to the lowest since Nov. 26 on an intraday basis. Nickel dropped 1.9 percent, copper declined 2.4 percent and oil in New York retreated 2.4 percent to $75.76 a barrel. Gold for December delivery slipped 0.4 percent to $1,651.90 an ounce after climbing as much as 1.4 percent earlier. The MSCI Emerging Market Index slid 2.6 percent, extending a decline from its May 2 high to 31 percent. Russia’s Micex lost 4.9 percent, and South Korea’s Kospi Index (KOSPI) sank 3.6 percent after the market was closed yesterday for a holiday. The MSCI China Index slumped 3.5 percent. To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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