Stocks, Oil Fall on China Rates, Apple Outlook; Dollar Rallies
Oct. 19 (Bloomberg) -- Stock slid, dragging the MSCI World Index down from a six-month high, as China raised interest rates and Apple Inc.'s profit forecast missed analyst estimates. The dollar rallied after Treasury Secretary Timothy F. Geithner said the U.S. will preserve confidence in a strong currency.
The MSCI gauge of equities in developed nations sank 1.4 percent, the most in almost two months, as of 9:37 a.m. in New York. The Standard & Poor's 500 Index slid 1.2 percent and the Nasdaq-100 Index, in which Apple has a 21 percent weighting, sank 1.6 percent. The Dollar Index, which tracks the currency against those of six trading partners, gained 1.5 percent for the biggest advance since August. Oil fell 2.8 percent to $80.79 a barrel in New York and copper lost 2.6 percent in London.
Technology companies were the biggest drag on the S&P 500 as Apple, the world's third-largest company, reported iPad sales that missed some analysts' estimates and International Business Machines Corp. posted a drop in new contracts. China's central bank raised one-year lending and deposit rates by 25 basis points. Geithner said yesterday the U.S. "will not engage" in currency devaluation.
"Technology is supposed to be one of the best things that the U.S. exports and the iPad is a major product, so if you see sales disappointing, the outlook for the economy is reduced," said Steve Tse, a Hong Kong-based research manager at BEA Union Investment Management, which oversees $4.5 billion.
Apple, IBM
Apple lost as much as 5.7 percent, its steepest decline since May, and IBM slid 4.3 percent. Financial shares retreated after Bank of America Corp. reported a $7.3 billion loss tied to the cost of new federal rules on consumer accounts and credit cards. Goldman Sachs Group Inc. gained 1.4 percent after reporting third-quarter earnings per share of $2.98, more than the average estimate of $2.29 in a Bloomberg survey.
U.S. equities retreated even after a government report today showed builders unexpectedly began work on more homes in September, a sign the real estate market is stabilizing at depressed levels.
Commodity, energy and technology stocks led declines in Europe's Stoxx 600, with Rio Tinto Group and Total SA losing more than 1.5 percent. The gauge for banks rallied 1.1 percent, with Deutsche Bank AG and Banco Santander SA gaining at least 2 percent.
The Basel Committee on Banking Supervision said it agreed on details of minimum liquidity requirements for banks in a report to the Group of 20 nations.
SKF, Porsche
SKF AB, the world's biggest maker of ball bearings, jumped 10 percent as earnings topped estimates. Porsche SE dropped 7.2 percent as Volkswagen AG Chief Executive Officer Martin Winterkorn said the merger of the two companies may have to put on hold until risks from U.S. lawsuits and German tax issues are resolved. German investor confidence fell to a 21-month low in October as weaker global growth and a stronger euro dimmed the export outlook, a report today showed.
The MSCI Emerging Markets Index declined for a third day, losing 0.6 percent, as technology companies including Samsung Electronics Co. and Infosys Technologies Ltd. retreated. The Bloomberg-JPMorgan Asia Dollar Index fell 0.5 percent, heading for the steepest drop since Aug. 11, after the World Bank lowered its growth forecast for east Asia and urged the region's policy makers to ward off asset bubbles.
Mol Nyrt., Hungary's largest refiner, climbed the most in two weeks, driving the benchmark BUX Index 1.2 percent higher, after Chief Executive Officer Zsolt Hernadi said in a radio interview the company may pay less tax than analysts estimated.
No Devaluation
The Dollar Index, used by IntercontinentalExchange Inc. to measure the greenback against the pound, yen, euro, Swedish krona, Swiss franc and Canadian dollar, climbed for the second time in the past three days.
"The United States of America and no country around the world can devalue its way to prosperity, to competitiveness," Geithner said yesterday in a panel discussion in Palo Alto, California. "It is not a viable, feasible strategy and we will not engage in it." He also said the U.S. will "work very hard to make sure that we preserve confidence in a strong dollar."
Brazil stepped up efforts to curb gains in the real by raising inflow taxes and said it may be forced to take additional measures as Finance Minister Guido Mantega called for an end to the worldwide "currency war." The nation, Latin America's largest economy, raised the so-called IOF tax on foreigners' investments in fixed-income securities to 6 percent from 4 percent. It also boosted the levy on money brought into the country to make margin deposits for transactions in the futures market to 6 percent from 0.38 percent.
Pound Weakens
The pound weakened against the dollar before the Bank of England releases minutes tomorrow from its latest meeting, while Chancellor of the Exchequer George Osborne details reductions in government spending plans to tackle the nation's budget deficit. Sterling slipped 0.9 percent to $1.5739.
German bonds fell, with the yield on the 10-year bund rising four basis points to 2.42 percent. Spain sold 4.18 billion euros ($5.82 billion) of 12-month bills at an average yield of 1.842 percent today, compared with 1.908 percent at the last auction on Sept. 21. It sold 2.22 billion euros of 18-month bills at a yield of 2.009 percent, compared with 2.146 percent in September, the Bank of Spain said.
Greece auctioned 1.17 billion euros of 13-week securities at a yield of 3.75 percent, down from 3.98 percent at a sale on Sept. 21.
Credit-default swaps insuring European junk-rated bonds declined, signaling an improvement in investor perceptions of credit quality, with the Markit iTraxx Crossover Index declining 8.6 basis points to 464.6, according to Markit Group Ltd.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: Paul Sillitoe in London at psillitoe@bloomberg.net
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