BLBG:Stocks Drop in Europe as Euro Weakens on Moody’s Review; U.S. Futures Fall
European stocks and U.S. equity futures fell and the euro weakened as Moody’s Investors Service said it will review ratings for countries in the region, while Italy and France prepared to sell debt. Commodities retreated.
The Stoxx Europe 600 Index dropped 1.1 percent at 9:38 a.m. in London. Standard & Poor’s 500 Index futures lost 0.9 percent. The euro depreciated 0.8 percent to $1.3275. The 10-year Italian bond yield jumped 19 basis points, while the extra yield investors demand to hold similar-maturity French notes instead of benchmark German bunds rose seven basis points. The cost of insuring against default on European government debt approached a record high. Silver and natural gas declined.
Last week’s European Union summit offered few new measures and doesn’t diminish the risk of credit-ranking revisions, Moody’s said today. While a European accord to limit budget deficits represents “progress,” the onus is on governments rather than the European Central Bank to resolve the crisis with financial backing, Bundesbank President Jens Weidmann told Frankfurter Allgemeine Sonntagszeitung, according to a report published yesterday. Italy and France plan to sell a combined 13.5 billion euros ($18 billion) of short-term debt.
“The European situation will continue to bother us into next year as policy initiatives seem insufficient,” said Mark Matthews, the Singapore-based head of research for Asia at Bank Julius Baer & Co., which oversees about $180 billion globally.
LSE Rating Review
Fives shares fell for every one that advanced in the Stoxx 600, extending last week’s 0.1 percent drop. Xstrata Plc and Eurasian Natural Resources Corp. led mining companies lower. London Stock Exchange Group Plc (LSE) slipped 2.9 percent as S&P placed its credit rating on review for a downgrade and the company agreed to buy the 50 percent of FTSE International Ltd. it doesn’t already own from Pearson Plc.
The decline in S&P 500 futures signaled the U.S. equity benchmark may trim its 1.7 percent gain on Dec. 9. The measure has climbed for two straight weeks, its first back-to-back weekly advance since October.
The two-year Italian note yield climbed 22 basis points as the government prepared to sell 7 billion euros of 365-day bills. Two-year French and Dutch securities underperformed German notes as the Netherlands readied an auction of as much as 4 billion euros of 107- and 198-day bills and France prepared to offer as much as 6.5 billion euros of 91-, 182- and 308-day instruments.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed for a fifth day, jumping seven basis points to 370, the highest since Nov. 28, close to its all-time high of 385. The Markit iTraxx Financial Index of contracts linked to the senior bonds of 25 banks and insurers increased five basis points to 301.
U.S. Debt Sales
The yield on the 30-year Treasury bond fell two basis points to 3.09 percent, with 10-year yields also slipping two basis points.
U.S. debt auctions over the next two weeks will probably total $177 billion, the largest concentration of so-called duration supply ever, JPMorgan Chase & Co., one of the 21 primary dealers that underwrite America’s borrowings, said in a report Dec. 9. This week’s sales will consist of $78 billion in notes, bonds and inflation-linked securities in four auctions starting today with $32 billion of three-year debt. The Treasury will announce on Dec. 15 how much it plans to raise in three offerings starting Dec. 19.
European carbon prices rose from record lows after the world’s largest polluters backed away from positions that stymied global climate talks for more than a decade. EU permits for delivery this month rose as much 6.2 percent and traded at 8.10 euros on the ICE Futures Europe exchange in London.
Commodities Fall
Silver dropped 2.2 percent to $31.51 an ounce and natural gas fell 1 percent to $3.251 for a million British thermal units. Copper declined 1.7 percent to $7,680 a metric ton and Brent crude was 0.7 percent lower at $107.82 a barrel.
The MSCI Emerging Markets Index (MXEF) gained 0.3 percent, snapping a two-day, 2.6 percent drop. The Micex index jumped 1.7 percent in Moscow after the largest protests against the Russian government in more than a decade passed off peacefully. The Sensex Index fell 1.1 percent in Mumbai and the Shanghai Composite Index (SHCOMP) lost 1 percent.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net;
To contact the editor responsible for this story: Stuart Wallace at jcarrigan@bloomberg.net
