BLBG:Asian Stocks Drop As Euro Slides To A Two-Year Low
Stocks (MXAP) dropped, the euro weakened to a two-year low and Spain’s default risk rose to a record as the country struggled to recapitalize its banks. Italian bonds stayed lower after a debt sale, while oil headed for its biggest monthly decline in almost four years.
The MSCI All-Country World Index (MXWD) slid 0.7 percent at 6:10 a.m. in New York. Spain’s IBEX 35 dropped 2 percent as Bankia SA lost 3 percent. Standard & Poor’s Index futures retreated 0.9 percent. The euro depreciated 0.5 percent to $1.2441, while the yen strengthened against its 16 most-traded peers. The yield on the 10-year Italian bonds jumped 22 basis points and the Spanish 10-year yield rose to a euro-era record relative to German bunds. The S&P GSCI gauge of commodities fell as much as 1 percent to the lowest level since Oct. 11.
Europe needs to take steps to help “debt sustainability,” Spanish Prime Minister Mariano Rajoy said today. Italy’s borrowing costs rose at the sale of five- and 10-year notes. Economic confidence in the euro area fell more than forecast in May to the lowest level in 2 1/2 years, the European Commission said today.
“Spain looks to have gotten to the point where it cannot bear the burden alone,” David Mackie, chief economist at JPMorgan Chase & Co. in London, wrote in a report. “The Spanish government recognizes the need for burden sharing, but it does not want the kind of burden sharing that was made available to Greece, Ireland and Portugal.”
ECB Rejects Bankia Plan
The Stoxx Europe 600 Index (SXXP) declined 1.2 percent as seven shares retreated for every one that gained. Bankia has tumbled 30 percent this week. The European Central Bank rejected a Spanish plan to recapitalize the state-owned lender, the Financial Times reported. The ECB said today it hasn’t been consulted by Spain on any plans to recapitalize a “major Spanish bank” and that it has “not expressed a position on plans by the Spanish authorities” for such a move.
Booker Group Plc advanced 8.5 percent after agreeing to buy Metro AG’s Makro U.K. wholesale unit.
The retreat in S&P 500 futures indicated the U.S. gauge will pare yesterday’s 1.1 percent rally. Research In Motion Ltd. slid 7.6 percent in German trading as the maker of the BlackBerry smartphone forecast a surprise operating loss for the first quarter and hired banks to advise on strategic options.
A report from the National Association of Realtors today will probably show pending home sales in the U.S. were unchanged in April after rising in the previous three months, a Bloomberg survey of 42 economists showed. The Labor Department is scheduled to release its monthly employment report on June 1.
Euro Weakens
The euro fell to the weakest against the dollar since July 1, 2010, and slid 1 percent versus the yen for its seventh consecutive decline. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, rose 0.2 percent to the highest since September 2010.
Credit-default swaps on Spain climbed 21 basis points to 581.5, helping drive the Markit iTraxx SovX Western Europe Index of swaps on 15 governments five basis points higher to 318.5.
Spain’s 10-year yield climbed 22 basis points, with the spread over bunds widening to as much as 534 basis points, or 5.34 percentage points. The yield on the German 10-year security fell as much as four basis points to 1.32 percent, the lowest on record.
The 10-year U.S. Treasury note yield fell five basis points to 1.69 percent.
Crude for July delivery decreased 1.2 percent to $89.65 a barrel in electronic trading on the New York Mercantile Exchange. A report tomorrow may show stockpiles climbed to the highest level since 1990 in the U.S. Prices are down 14.4 percent this month, the biggest drop since December 2008.
Natural Gas Slides
Natural gas futures fell, sliding 13 percent in four days, on forecasts for cooler weather in the U.S. Northeast that may cut power-plant demand. Copper slipped 1.4 percent and gold retreated 0.4 percent to $1,549.77 an ounce, set for a fourth monthly decline. That would be the longest losing streak since 1999.
The MSCI Emerging Markets Index (MXEF) slid 1.1 percent as benchmark gauges in Russia, South Africa, Turkey, Poland, Hungary, Taiwan and Thailand fell more than 1 percent. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong dropped 1.7 percent after Xinhua News Agency said yesterday that China has no plans to introduce stimulus measures on the scale seen during the global financial crisis. India’s Sensex Index declined as Tata Motors Ltd., the country’s largest automaker, sank 12 percent after its main Jaguar Land Rover unit posted earnings that missed analysts’ estimates.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net;
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
