European equity futures and Asian stocks fell, while South Korea’s won weakened and Japanese bond yields slid to the lowest since 2003 as Europe’s debt crisis worsened and a U.S. factory gauge contracted. The Dollar Index (DXY) extended its longest rally. Euro Stoxx 50 Index futures declined 1.4 percent as of 7:01 a.m. in London while those for the Standard & Poor’s 500 Index lost 0.4 percent. The MSCI Asia Pacific Index slipped 3 percent, its biggest drop since November, erasing the year’s gains. The euro declined to a four-month low, heading for a third weekly loss and South Korea’s won was set for its worst week in almost eight months. Japan’s 10-year-note yield fell three basis points to 0.815 percent, while similar-maturity Treasuries approached a record low. The Dollar Index rose 0.3 percent in a 15-day rising streak. Oil decreased a sixth day. Almost $4 trillion has been wiped from global equity markets this month as Europe’s deepening crisis threatens the global recovery. Moody’s Investors Service lowered debt ratings at 16 Spanish banks, while Fitch Ratings cut Greece’s credit rating on concern the country may not be able to sustain euro membership. The Federal Reserve Bank of Philadelphia’s general economic index slid to minus 5.8 in May. Data today showed China’s home prices fell in a record number of cities in April. “Investor sentiment is at its worst,� said Masaru Hamasaki, the chief strategist at Toyota Asset Management Co., which oversees the equivalent of about $23.8 billion. “We don’t know what will happen with Greece, and when something does happen, we don’t know what impact that will have. All people can do is escape from risks, a so-called panic.� Greece Downgrade Greece had its credit rating downgraded by one level to CCC from B- by Fitch yesterday after political leaders failed to form a government in the wake of a May 6 election. The ratings for Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest lenders, were reduced three levels by Moody’s. In Spain, the cost of insuring against a default jumped to a record after the nation sold January 2015 bonds at an average yield of 4.375 percent, compared with 2.89 percent when they were last auctioned in April. The euro touched $1.2655. The 17-nation currency has fallen 1.9 percent since May 11, set for its third weekly loss, the longest string of declines since the period ending Jan. 13. Raw-Materials Almost 19 stocks declined for each that rose in the MSCI Asia Pacific index (MXAP), which yesterday entered a so-called correction after falling more than 10 percent from a peak on Feb. 29. All 10 industries in the gauge declined with raw- material producers slumping the most, by 3.7 percent. Hong Kong’s Hang Seng Index (HSI) dropped 2.5 percent to a four-month low and the Shanghai Composite Index slid 1.1 percent. South Korea’s Kospi (KOSPI) index lost 3.4 percent. The regional benchmark has fallen 5.5 percent this week, poised for the biggest drop since September. Japan’s Topix Index is headed for a seventh weekly retreat, the longest stretch since the Sept. 11 attacks in 2001. In the U.S., economic reports yesterday showed jobless claims were unchanged at 370,000 in the week ended May 12. That compares with the median forecast of 48 economists surveyed by Bloomberg News for a drop in claims to 365,000. ‘Double-Whammy’ “Investors are taking money out from riskier assets given the lingering concerns about Europe’s debt problem and the economic recovery outlook,� said Shigehisa Shiroki, a chief trader on the Asian and emerging-markets team in Tokyo at Mizuho Corporate Bank Ltd. “It’s a double-whammy for Asian currencies as many countries depend on exports for growth.� South Korea’s won touched 1,175.30 per dollar earlier today, the weakest level since December, as central bank Governor Kim Choong Soo said the nation’s financial markets are more vulnerable to European risk than those elsewhere in Asia. India’s rupee sank to an all-time low, while Malaysia’s ringgit dropped 0.8 percent and Indonesia’s rupiah fell 0.5 percent. The Australian dollar touched a more than five-month low, extending declines to a third-straight week. Bond Risk The cost of insuring Japanese corporate debt from default surged to the highest in more than seven months, according to traders of credit-default swaps. The Markit iTraxx Japan index increased 7 basis points to 218.5 basis points, according to Citigroup Inc. prices. The benchmark is on course for its highest level since Oct. 5, according to data provider CMA. The S&P GSCI spot index of 24 commodities fell 0.5 percent, bringing this year’s losses to 2.7 percent amid speculation a global economic slowdown may hurt demand for raw materials. Crude oil in New York dropped 0.5 percent to $92.07 a barrel, heading for the third weekly decline. Soybeans in Chicago dropped 0.5 percent and gold lost 0.2 percent, while rubber futures in Tokyo fell 1.3 percent. To contact the reporters on this story: Sungwoo Park in Seoul at spark47@bloomberg.net; Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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