BLBG:Stocks, Euro Decline Before EU Summit As Treasuries Gain
Stocks (MXWD) fell for a third day, the euro weakened and Treasuries rose on concern a meeting of European leaders this week will fail to help contain the region’s debt crisis. Crops rallied and Egyptian shares climbed the most in five months.
The MSCI All-Country World Index slid 0.5 percent at 7:20 a.m. in New York, while Standard & Poor’s 500 Index futures retreated 0.8 percent. The euro traded below $1.25 for the first time since June 13. The yield on the 10-year U.S. Treasury note declined five basis points to 1.63 percent, and the German bund yield fell nine basis points. The Spanish 10-year yield increased 15 basis points. Corn jumped 4.1 percent and soybeans climbed 3.3 percent.
Failure by leaders at the two-day summit to come up with measures to shore up the weakest countries’ finances may be “fatal” for the euro, billionaire investor George Soros said yesterday. Central banks are facing the limit of their ability to boost economic growth, the Bank for International Settlements said. Citigroup Inc. cut China’s growth forecast on concern demand from Europe will slow.
“Already hopes that significant achievements will be achieved at the EU summit this week seem to be fading and converging towards our low expectations,” Vincent Chaigneau, global head of interest-rate strategy at Societe Generale SA in Paris, wrote today in a report.
The Stoxx Europe 600 Index (SXXP) dropped 1 percent. Shire Plc plunged 13 percent, the most since February 2005 on an intraday basis, after U.S. regulators unexpectedly approved a copycat version of its second-best selling drug.
Home Sales
The decline in S&P 500 futures indicated the U.S. equities gauge will extend last week’s 0.6 percent retreat. A Commerce Department report at 10 a.m. in Washington may show that new- home sales rose 0.9 percent to a 346,000 annual pace in May, according to the median forecast in a Bloomberg survey of economists.
The MSCI Emerging Markets Index (MXEF) slipped 0.8 percent, falling for a third day. The Shanghai Composite Index slid 1.6 percent to the lowest close since Jan. 16. The ISE National 100 Index fell 0.7 percent in Istanbul. Turkey is weighing a response after Syria shot down one of its warplanes in international airspace, Foreign Minister Ahmed Davutoglu said.
Egypt’s EGX30 Index jumped 6.8 percent, the most since Jan. 26, after Mohamed Mursi, the Muslim Brotherhood candidate, was declared the country’s first freely elected president. India’s rupee rose 0.2 percent, paring earlier gains of as much as 1.3 percent, after central bank said the government increased the amount of rupee-denominated debt overseas investors can own by $5 billion to $20 billion.
Dollar Climbs
The euro sank 0.7 percent to $1.2483 and 1.5 percent against the yen. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, jumped 0.4 percent.
Policy makers should create a European Fiscal Authority to purchase sovereign debt in return for Italy and Spain implementing achievable budget cuts, Soros said in London. Funding would come from European Treasuries backed by each euro member, he said.
The Italian two-year yield climbed 36 basis points to 4.16 percent, with the similar-maturity Spanish yield advancing 28 basis points. The Belgian five-year note yield dropped four basis points as the government sold 2.8 billion euros ($3.5 billion) of 2017, 2022 and 2032 bonds. Germany sold 2.045 billion euros of 12-month bills, while France auctions as much as 8.4 billion euros of short-dated securities.
The 30-year U.S. Treasury bond yield declined five basis points.
Corn and soybeans rallied. Most of Iowa and Illinois, the biggest U.S. corn and soybean-growing states, will be mostly dry until at least June 29, according to the National Weather Service. Brent crude fell 0.7 percent to $90.37 a barrel and oil dropped 0.4 percent to $79.42 a barrel in New York. Tropical Storm Debby shifted away from offshore energy installations.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net;
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
