Stocks, Futures Fall on Korea, Europe Debt Woes; Dollar Gains
Nov. 26 (Bloomberg) -- Stocks and U.S. index futures dropped as tensions in Korea mounted and concern deepened over Europe's debt woes. The cost of insuring against defaults by Portugal, Spain and Ireland rose to records and the dollar strengthened.
The MSCI World Index of stocks slipped 0.9 percent at 6:46 a.m. in New York, while futures on the Standard & Poor's 500 Index lost 1 percent. South Korea's Kospi Index fell 1.3 percent and Hungary's BUX Index slid 3.7 percent. The extra yield investors demand to hold Spanish 10-year bonds over benchmark German bunds climbed to 264 basis points, a euro-era record. The dollar appreciated 1.1 percent to $1.3227 per euro, a two-month high. The S&P GSCI index of 24 commodities declined 0.8 percent.
More than $1.8 trillion has been wiped off the value of global equities in the past three weeks as traders speculated Ireland's debt crisis will spread to other European Union countries, according to data compiled by Bloomberg. European Central Bank council member Erkki Liikanen said in a speech published today that policy makers may keep support measures in place for longer "if required." South Korea said the North may have conducted artillery drills, after its neighbor warned of retaliation to any encroachment of its sovereignty.
"Global markets continue to trade nervously and without clear conviction as the EU sovereign and Korean crisis fears remained front-page news," Kit Juckes, head of foreign-exchange research at Societe Generale AG in London, wrote in a report. Korea keeps "the risk-aversion train rolling along."
Santander, Bank of Ireland
The Stoxx Europe 600 Index slumped 1.2 percent as more than five companies fell for every one that gained. Spanish banks led the decline, sending the IBEX 35 index down 2.6 percent. Banco Santander SA, Spain's biggest lender, dropped 4.5 percent, while Bankinter SA sank 4.1 percent. Bank of Ireland Plc slid for a fifth day, losing 3.5 percent. BNP Paribas SA, France's largest lender, slipped 4.5 percent. Rio Tinto Group lost 3.5 percent.
Hungarian stocks sank for a second day, with the benchmark BUX Index posting the steepest drop worldwide, after the government said citizens must move their privately managed pension assets to the state or lose 70 percent of their pension claim. Economy Minister Gyorgy Matolcsy announced the policy on Nov. 24 as the most indebted eastern member of the EU steps up efforts to reduce the budget deficit.
The MSCI Asia Pacific Index fell 1.2 percent to its lowest level in a month. Hana Financial Group Inc., South Korea's fourth-largest financial company, slumped 4.1 percent. China's Shanghai Composite Index dropped 0.9 percent after Shanghai Securities News reported the government may cut its target for new lending next year. Industrial & Commercial Bank of China Ltd. lost 1.6 percent.
Black Friday
The decline in U.S. futures indicated the S&P 500 may pare some of its 1.5 percent rally on Nov. 24. U.S. markets were closed yesterday for the Thanksgiving holiday. Retailers and shoppers are preparing for Black Friday, the biggest shopping day of the year and a bellwether for the holiday season. Analysts' estimates for holiday sales vary from little changed to increases of as much as 4.5 percent.
The yield on the Spanish 10-year bond jumped five basis points to 5.26 percent, bringing its increase since Nov. 16 to 72 basis points. Credit-default swaps on Spain climbed 21 basis points to 320.5, while contracts on Portugal soared 31.5 basis points to 507.5 and those on Ireland increased 19 basis points to 599.5.
Dollar Gain
The yield on the U.S. 10-year Treasury note dropped five basis points to 2.87 percent. The Dollar Index, which tracks the currency against those of six trading partners, jumped 0.8 percent to 80.327, set for its third consecutive weekly gain, the longest sequence of gains since May 14. The euro depreciated 0.6 percent to 111 yen, and fell 0.1 percent in a basket of 10 currencies, according to Bloomberg Correlation-Weighted Currency Indexes.
Copper for delivery in three months dropped 1.6 percent to $8,210 a metric ton on the London Metal Exchange, declining for the first time in three days. Aluminum, nickel and zinc also retreated. Gold fell 1 percent to $1,361.70 an ounce and silver slid 3.2 percent to $26.68 an ounce. Brent crude for January settlement fell 1.1 percent to $85.16 a barrel on the London- based ICE Futures Europe exchange.
To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net
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