Stocks and the euro declined as Italy’s borrowing costs increased to a euro-era record at an auction today, deepening concern Europe will struggle to contain its debt crisis. German bunds rose, while copper climbed as Japan’s economy grew for the first time in a year.
The Stoxx Europe 600 Index dropped 0.9 percent at 7 a.m. in New York, and futures on the Standard & Poor’s 500 Index lost 0.4 percent. Japan’s Nikkei 225 Stock Average climbed 1.1 percent. The euro weakened 0.5 percent to $1.3681. The yield on the Italian five-year bond rose four basis points, with the 10- year benchmark German bund yield eight basis points lower. Copper jumped 1.9 percent.
Italy sold 3 billion euros ($4.1 billion) of five-year notes priced to yield 6.29 percent, the highest since June 1997. German Chancellor Angela Merkel said it’s time to embrace a “political union” in Europe to send a message to bondholders that euro-area leaders are serious about ending the sovereign debt crisis. Japan’s gross domestic product grew an annualized 6 percent in the last quarter as exports recovered from the record earthquake on March 11, government data showed.
In Europe, “the situation remains fragile and everything can crack very quickly,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, who helps oversee about $400 million in stocks. “We’re still in reaction rather than action mode.”
Three shares fell for every two that gained in the Stoxx 600. Hochtief AG sank 9.4 percent after Germany’s largest construction company delayed the sale of its airport operating business and reported third-quarter earnings that missed estimates. ITV Plc advanced 3.4 percent as the U.K. broadcaster reported increased revenue.
Boeing Orders
S&P 500 advanced 0.9 percent last week, bringing the gauge to a 0.5 percent gain this year. Boeing Co. advanced 1.6 percent in pre-market trading. The planemaker secured the biggest order in its almost 100-year history after signing a $26 billion agreement with Emirates for as many as 70 777 aircraft.
The yield on Italy’s 10-year bond increased nine basis points. Demand was 1.47 times the amount on offer, compared with 1.34 times last month, when the yield was 5.32 percent at the last auction on Oct. 13. Former European Union Competition Commissioner Mario Monti was asked yesterday to set up a government faced with trying to cut the euro region’s second- biggest debt.
‘Credibility Lost’
There was “decent bidding” at today’s auction, Annalisa Piazza, an economist at Newedge Group in Italy, said in a report. “Dealers remain cautious. Credibility has been lost and it will take a while for market participants to believe that the country is back on the right track.”
The 10-year French yield slid 10 basis points, with the Spanish yield rising six basis points. The Greek two-year note yield surged 298 basis points, or 2.98 percentage points, to 111.88 percent.
The MSCI Emerging Markets Index climbed 0.8 percent. South Korea’s Kospi Index (KOSPI) and Taiwan’s Taiex Index rose more than 2 percent. The Hang Seng China Enterprises Index in Hong Kong jumped 2.8 percent. Hungary’s forint sank 1.5 percent against the euro and the BUX Index of stocks lost 2.5 percent after S&P said it may cut the country’s debt rating to speculative grade.
Oil in New York fell 0.7 percent to $98.34 a barrel, while raw sugar jumped 1.3 percent.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net
