BLBG:Stocks, Commodities Drop as Euro Weakens on Greek Crisis
Stocks fell, commodities declined to their cheapest level this year and the euro weakened to a three- month low on concern that Greece will exit the single European currency and after German Chancellor Angela Merkel’s party lost a state election.
The MSCI All-Country World Index (MXWD) slid 0.8 percent at 8:15 a.m. in New York, beginning a third week of losses. Standard & Poor’s 500 Index futures sank 0.7 percent. The euro declined to less than $1.29 for the first time since Jan. 23, while the Dollar Index advanced for an 11th day. U.S. 10-year Treasury futures rose to the highest on record. The cost of insuring against a Spanish default jumped to an all-time high. The S&P GSCI gauge of 24 commodities dropped as much as 1.8 percent.
Greek withdrawal “is not necessarily fatal, but it is not attractive,” European Central Bank Governing Council member Patrick Honohan said May 12 as the country faces a 436 million- euro ($561 million) note coming due for repayment tomorrow. European governments are preparing to raise more than 20 billion euros from debt sales today. Merkel’s party was defeated in North Rhine-Westphalia two days before a report that will show whether the nation slipped into recession.
“Greece leaving would remain a dangerous template if other economies continued to weaken,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a report. “Investors would surely fear that a similar outcome was possible and would either shy away from investments or demand an unsustainable risk premium for holding exposure.”
Greek Shares Slide
The Stoxx Europe 600 Index (SXXP) sank 1.9 percent as all 19 industry groups retreated. Opap SA, Europe’s biggest listed gambling company, led Greek stocks lower, tumbling 13 percent for the biggest drop since November. Greece’s benchmark ASE Index traded at the lowest level since November 1992 for a second day, tumbling 5.2 percent. The political deadlock looked set to continue for a second week as President Karolos Papoulias failed to secure agreement on a unity government.
The decline in S&P 500 futures indicated the U.S. equities gauge will extend a two-month low. The yield on the 10-year Treasury note dropped five basis points to 1.79 percent.
The entire London staff of JPMorgan Chase & Co.’s chief investment office is at risk of dismissal as a $2 billion trading loss prompts the first executive departure as soon as this week, a person familiar with the situation said. JPMorgan’s shares were little changed in pre-market trading.
The euro depreciated 0.4 percent to $1.2865, and slipped 0.6 percent versus the yen. The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced 0.3 percent. The Australian dollar fell below parity with the greenback for the first time this year, with the Swedish krona weakening to less than 7 per dollar for the first time since Jan. 16.
Debt Sales
The yield on the Spanish 10-year bond rose 34 basis points to 6.34 percent. The nation sold 2.9 billion euros of bills maturing in 364 and 518 days, compared with a maximum target of 3 billion euros. Italy’s 10-year yield increased 28 basis points to 5.79 percent as the government auctioned 5.25 billion euros of securities due in 2015, 2020, 2022 and 2025. The German bund yield fell to a record 1.438 percent as the government sold 3.3 billion euros of six-month bills, with Finland and France also auctioning debt today.
Credit-default swaps on Spain climbed 24 basis points to an all-time high of 541.
The S&P GSCI fell to the lowest since Dec. 20, with copper down 1.7 percent and gold futures declining 1.3 percent. New York oil dropped 1.8 percent to $94.40 a barrel, and Brent crude futures declined 1.3 percent to $110.81 a barrel in London. Saudi Arabian Oil Minister Ali al-Naimi said yesterday in Adelaide, Australia, that Brent crude, the benchmark price for more than half the world’s oil, should trade at about $100 as crude supply outweighs demand.
The MSCI Emerging Markets Index (MXEF) dropped 1.3 percent, headed for its lowest close since Jan. 16. The Hang Seng China Enterprises Index (HSCEI) of Chinese stocks listed in Hong Kong fell 1.5 percent, its eighth consecutive decline. The People’s Bank of China said on May 12 it’s cutting the amount of cash that banks must set aside as reserves for a third time since November. Benchmark gauges in Russia and Poland fell more than 2 percent. India’s Sensex dropped 0.5 percent after inflation unexpectedly quickened in April.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net;
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
