Stocks, Euro, Italy Bonds Drop on Contagion Concern; Gold Jumps
Nov. 30 (Bloomberg) -- Stocks fell to the lowest in almost two months, the euro weakened for a third day and Italian and Spanish bond yields rose compared with German debt on concern the region's crisis is worsening. U.S. index futures declined.
The euro depreciated 1 percent against the dollar at 9:02 a.m. in New York. The extra yield investors demand to hold 10- year Italian debt instead of benchmark German bunds widened to more than 200 basis points for the first time since the euro's debut in 1999. The difference in the cost of insuring subordinated and senior European financial-company bonds rose to the most since May 2009. The MSCI World Index lost 0.4 percent to the lowest level since Oct. 4, and futures on the Standard & Poor's 500 Index sank 1 percent. Gold jumped 1.4 percent.
Government securities and the euro are being dragged down by concern Portugal and Spain may suffer the fate of Ireland, which had to ask for an 85 billion-euro ($111 billion) rescue package to help bail out its banks. A report today showed real- estate prices in 20 U.S. cities rose in September at the slowest pace in eight months, indicating the latest slump in sales is destabilizing housing.
"Euro-area contagion is becoming fairly indiscriminate," Valentin Marinov, a currency strategist at Citigroup Inc. in London, wrote in a report today. "There is so far little indication that euro-area politicians will act quickly and forcefully enough to prevent further spread widening. We cannot exclude more euro selling."
Euro, Dollar
The euro weakened against all but two of its 16 most-traded peers, dropping as much as 1.2 percent to $1.2969, the lowest level since Sept. 15. It fell 1.9 percent to 108.51 yen. The Dollar Index advanced a third day, gaining 0.6 percent to 81.324 after reaching 81.444, the highest level since Sept. 20.
The difference in yield between Italian 10-year bonds and German bunds widened to as much as 212 basis points, the most since 1996. The Spanish-German yield spread rose to 281 basis points and the yield premium for Belgian 10-year bonds reached 133 basis points, the most since January 2009.
Credit-default swaps insuring Italian government bonds rose seven basis points to 253, contracts on Spain increased nine basis points to 361 and Portugal climbed 11.5 basis points to 551, all record highs, according to CMA, a data provider.
The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers rose 8 basis points to a 2 1/2-month high of 173, while an index of subordinated notes climbed 23.5 basis points to 318. The gap between the two widened 15.5 to 145 on expectations subordinated bondholders will be forced to share the cost of bailing out lenders.
European Stocks
The Stoxx Europe 600 Index slid 0.4 percent, extending this month's retreat to 1.8 percent, the worst monthly performance since May. Banks and insurers led today's declines. Societe Generale SA, the Paris-based lender, lost 5.4 percent and Ageas, the insurer formerly known as Fortis, dropped 5.5 percent.
Hochtief AG rose 2 percent after Actividades de Construccion y Servicios SA won approval from Germany's financial regulator for its 2.7 billion-euro ($3.5 billion) bid for the German construction company. Alstom SA gained 1.8 percent as Deutsche Bank AG raised its recommendation on the world's third-largest power-equipment maker to "buy."
The MSCI Asia Pacific Index decreased 0.8 percent to the lowest level since Oct. 5, while the MSCI Emerging Markets Index slipped 0.6 percent to a two-month low. The Shanghai Composite Index dropped 1.6 percent, capping its first monthly retreat since June, after Zhong Jiyin of the Chinese Academy of Social Sciences wrote in a commentary in China Daily that recent increases in banks' reserve requirements won't be enough to reverse excessive liquidity in the system.
The decline in U.S. futures indicated the S&P 500 may fall for a third day. The S&P/Case-Shiller index of property values climbed 0.6 percent from September 2009, the smallest gain since January, the last time prices declined year over year, the group said today in New York. The increase was smaller than the 1 percent median forecast in a Bloomberg survey of economists. Other reports may show consumer confidence rose and businesses expanded.
Baldor, ABB
Baldor Electric Co. may jump in U.S. trading after ABB Ltd., the Swiss maker of factory robots and electrical equipment, agreed to buy the company for about $3.1 billion in cash to expand in the North American market for industrial motors and drives.
Futures on Canada's S&P/TSX 60 Index slumped 0.8 percent, extending losses after the nation reported economic growth slowed more than economists forecast last quarter. The nation's gross domestic product expanded at a 1 percent annualized third- quarter pace, slower than the 1.5 percent projected by economists in a Bloomberg survey.
Gold for immediate delivery rose 1.4 percent to $1,384.80 an ounce. The S&P GSCI Index of 24 commodities fell 0.6 percent and oil sank 1 percent to $84.89 a barrel.
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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