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Stocks Drop, Treasuries and Dollar Gain on Elections in Europe

Sunday, 06 May 2012 08:13 PM EDT

Stocks fell, dragging the MSCI All- Country World index to a three-month low, while Treasuries rose and the Dollar Index advanced for a sixth day after French Socialist Francois Hollande was elected president and Greek voters picked anti-bailout parties.


The MSCI All-Country World Index slid 0.9 percent as of 10:16 a.m. in London, after reaching the lowest since Feb. 1. Greece’s ASE Index plunged 8.1 percent, the most since October 2008, and Standard & Poor’s 500 Index futures fell 0.8 percent. The euro weakened 0.5 percent to $1.3018, U.S. 10-year Treasury yields fell four basis points, with similar-maturity French yields rising three basis points. The S&P GSCI Index of raw materials fell for a fourth day, and was close to giving up its gains this year.

Hollande, the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity. His platform calls for policies German Chancellor Angela Merkel opposes, including increased spending and a delayed deficit-reduction effort. The new Greek parliament will have three new anti-bailout parties represented.

“There’s been a lot of concern about what’s going on in the U.S., China, and recession in Europe and now we have more concern about Europe,” Vasu Menon, the vice president for wealth management at Singapore-based Oversea-Chinese Banking Corp., said in a Bloomberg Television interview. The company oversees about $223 billion. “That’s going to hurt the markets.”

Recession Threats

Austerity measures aimed at stemming Europe’s turmoil have driven economies from the Netherlands to Spain back into recession, emboldening politicians campaigning for growth.

The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced 0.4 percent, rising in the longest run of increases since September. The euro depreciated to less than $1.30 for the first time since April 16, and slid 0.4 percent versus the pound. The yen strengthened against most of its 16 major peers.

The German 10-year bund yield fell one basis point to 1.57 percent, after dropping to a record along with five- and 30-year yields. The yield on the Greek bond due in February 2022 surged 220 basis points to 22.77 percent. The yield on the Spanish 10- year bond rose eight basis points, with the Italian security nine basis points higher.

France sells as much as 8 billion euros of bills due in 84, 174 and 357 days, with the Netherlands also auctioning short- dated securities.

European Stocks

The Stoxx Europe 600 Index lost 0.6 percent as more than 19 companies retreated for each that gained. U.K. markets were closed for a holiday. BNP Paribas SA and Societe Generale SA, France’s biggest lenders, slid more than 3 percent. National Bank of Greece SA plunged 16 percent for the largest decline since November.

CSM NV, the world’s biggest maker of bakery ingredients, rallied 24 percent after saying it will sell U.S. and European bakery-supply units.

The decline in S&P 500 futures indicated the U.S. gauge will extend a two-week low. Georgia Gulf Corp. slid 9.8 percent in German trading after Westlake Chemical Corp. withdrew its unsolicited $1.2 billion bid for North America’s largest maker of vinyl construction products.

Credit-default swaps insuring France’s government bonds rose 1 basis point to 191, according to data compiled by Bloomberg. Swaps tied to Spanish debt fell two basis points to 479 and Germany was little changed at 84.

Contracts on BNP Paribas SA climbed two basis points to 249, while Societe Generale SA was four basis points higher at 307 and Credit Agricole SA swaps rose two basis points to 304.

Global Bonds

U.S. Treasury 10- and 30-year yields fell for the second day, while the yield on the Japanese 10-year bond declined three basis points to 0.855 percent, the least since October 2010, and the similar-maturity Australian security’s yield slid 17 basis points to a record.

The MSCI Emerging Markets Index lost 1.6 percent, heading for its biggest slump since April 4. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong lost 2.8 percent, with benchmark gauges in Russia, India, Turkey, Poland, Hungary, the Czech Republic and South Korea sinking more than 1 percent. Taiwan’s Taiex Index dropped 2.1 percent as inflation accelerated.

The S&P GSCI Index of commodities fell as much as 1.3 percent to 645.29, the lowest level since Dec. 30. Copper for July delivery on the Comex in New York declined 0.9 percent to $3.6875 a pound, and earlier today fell as much as 1.5 percent to $3.6665, the lowest price for the most active contract since April 24. Oil fell to $95.34 a barrel in New York, the lowest in more than four months. The London Metal Exchange is closed for a public holiday.

“There are still many hurdles in Europe,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview. “There are no easy answers and the electorate is rejecting austerity. People will take a renewed focus on Europe and that focus is not positive.”

© Copyright 2023 Bloomberg News. All rights reserved.

Sunday, 06 May 2012 08:13 PM
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