Stocks in Europe and copper dropped for the first time in five days after European Central Bank President Jean-Claude Trichet said the debt crisis threatens the financial system. Treasuries declined, while emerging-market stocks extended their longest advance since 2009. The Stoxx Europe 600 Index slid 0.8 percent at 11:19 a.m. in London. Standard & Poor’s 500 Index futures fell 0.5 percent, after the U.S. stocks gauge jumped the most since August yesterday. The cost of insuring debt against default tumbled in Japan. The yield on the 10-year U.S. Treasury note rose four basis points and the German 10-year bund yield declined three basis points. Copper declined 2.6 percent. The crisis has reached a “systemic dimension,” Trichet told European lawmakers in Brussels today, as Slovakia, the only country in the region that hasn’t ratified the retooled bailout fund, prepared to vote on the package. Alcoa Inc. (AA) will be the first Dow Jones Industrial Average company to report results today in a quarter that’s forecast to show the slowest growth in profits since the end of 2009. “The markets would find any excuse to see a little bit of a setback,” said Robert Buckland, head of global equity strategy at Citigroup Inc. in London. “The ECB wants the politicians to make the tough decisions and the stock market wants the tough decisions to made.” Stoxx 600 About four shares retreated for every one that advanced in the Stoxx 600. The index rallied 8.5 percent in four days through yesterday, the most since November 2008. The decline in S&P 500 futures followed the gauge’s 3.4 percent gain yesterday. Alcoa, the biggest U.S. aluminum producer, may say today after U.S. markets close that profit was 23 cents a share, compared with 9 cents a year earlier, according to the average estimate in a Bloomberg News survey of 15 analysts. S&P 500 earnings, excluding financial companies, are forecast to have increased 14 percent for the third quarter, the smallest gain since the end of 2009, analysts’ estimates compiled by Bloomberg show. “You’re getting more profit warnings because the economic news has been dire for several months now,” said Ian Murrell, an analyst at Pritchard Stockbrokers Ltd. in London who correctly forecast last year’s gain in U.K. stocks and gold’s increase to a record this year. “The two main props to equity markets in recent years have been quantitative easing and decent corporate results. With the weaker economy that we’re seeing, sooner or later that’s going to impact corporate profits.” Bondholder Writedown Greek 10-year bonds slid after Luxembourg’s Prime Minister Jean-Claude Juncker, who leads the group of euro-area finance ministers, said bondholders may need to take a writedown of more than 60 percent on the nation’s debt. His spokesman, Guy Schuller, later said he meant that haircuts could exceed the 21 percent already agreed in July. The yield on the two-year German note declined three basis points. The Italian two-year note yield was little changed at 4.12 percent as the government prepared to sell as much as 9.5 billion euros of 74- and 367-day bills. Greece is auctioning 1 billion euros of 186-day securities, while the Netherlands issues as much as 3 billion euros of 2017 notes. U.S. three-year note yields climbed for a fifth day before an auction of $32 billion of the securities. The Treasury is scheduled to offer 10-year debt tomorrow and 30-year bonds in two days. Treasuries didn’t trade yesterday because of holidays in the U.S. and Japan. The euro weakened 0.4 percent to $1.3593. U.K. Manufacturing The 17-nation currency depreciated 0.3 percent versus the yen, and erased an advance against the pound. Sterling fell 0.3 percent to $1.5626 after a report showed U.K. manufacturing slid more than economists forecast in August, adding to signs that the recovery continued to struggle in the third quarter. Factory output fell 0.3 percent from July, when it declined a revised 0.2 percent, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg News survey was for manufacturing to fall 0.2 percent. The MSCI Emerging Markets Index climbed 0.9 percent, driving the benchmark index to its steepest five-day gain since 2009. The Hang Seng China Enterprise Index of Chinese companies traded in Hong Kong jumped 4.4 percent after the Chinese state investment fund bought shares in four banks. The Taiex Index surged 2.6 percent after a holiday in Taiwan yesterday, while South Korea’s Kospi Index (KOSPI) climbed 1.6 percent to a three-week high. Russia’s Micex Index slid 1.1 percent after jumping 9.1 percent in the past three sessions. Credit-default swaps insuring Japanese government debt tumbled 15 basis points to 108.5, according to CMA, completing the biggest four-day decline since 2004. The contracts reached a record 154.8 basis points on Oct. 4. The cost of insuring sovereign debt in Europe also fell, with the Markit iTraxx SovX Western Europe Index of swaps linked to 15 governments dropping 2 basis points to 320, the lowest since Sept. 7. Copper declined to $7,305 a metric ton on the London Metal Exchange, after rising 10 percent in the past four days. Oil lost as much as 1.3 percent in New York to $84.27 a barrel. To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net

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