World Stock Index Declines for Sixth Day as Yen, Bonds Rally

By Stuart Wallace

Jan. 27 (Bloomberg) -- The MSCI World Index of stocks fell for a sixth day, its longest losing streak in almost a year, on concern the global economic recovery will falter. The yen and bonds rose while industrial metals dropped.

The MSCI Index retreated 0.2 percent at noon in London, bringing its six-day slide to 5.2 percent. Futures on the Standard & Poor’s 500 Index rose 0.2 percent. The yen strengthened against 11 of its 16 biggest counterparts and copper declined for a second day. Greek bonds tumbled, driving the 10-year note yield up 18 basis points to 6.42 percent.

Investors are concerned that economic growth will falter as the Federal Reserve and the European Central Bank curb stimulus measures and economists predict central banks in China, India, Brazil and Australia will push up borrowing costs. Earnings setbacks also hurt stocks. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, and SAP AG, the biggest maker of business-management software, missed analysts’ estimates.

“People came into this year with too optimistic a view and now they are being punished for that,” said Charles Morris, who runs HSBC Investment Management’s Absolute Return Fund in London with about $2.5 billion in assets. “It’s perfectly healthy to have this correction.”

Europe’s Dow Jones Stoxx 600 Index fell 0.3 percent as financial shares retreated. Banco Bilbao sank 5.3 percent in Madrid. Man Group Plc, the largest publicly traded hedge fund company, plunged 3.2 percent in London after the value of its biggest program-driven fund dropped the most in seven weeks.

Emerging Markets

Asian stocks declined for an eighth day, the longest losing streak since May 2005 as the MSCI Asia Pacific Index slid 1.1 percent. The MSCI Emerging Markets Index fell 0.5 percent, taking its six-day retreat to 7.8 percent in the longest slump in a year. The Shanghai Composite Index sank 1.1 percent as banks dropped on lending curbs and investors speculated policy makers may soon raise rates.

Westpac Banking Corp. declined 2.4 percent in Sydney as investors increased bets the central bank will raise interest rates as early as next week. Toyota Motor Corp. fell 4.3 percent in Tokyo on plans to halt U.S. sales of eight models involved in a recall.

U.S. futures advanced after the S&P 500 fell 0.4 percent yesterday. A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the fourth quarter with a 73 percent increase in profits. More than 130 companies are scheduled to release results this week, including Abbott Laboratories, Boeing Co. and Caterpillar Inc. today.

Fed Decision

The Federal Open Market Committee, gathering while Chairman Ben S. Bernanke awaits a Senate vote on whether to confirm him for a second term, is forecast to keep the benchmark for short- term interest rates in the zero to 0.25 percent range, where it’s been since December 2008. The Fed may take a chance the housing market can stage a comeback without its support by announcing today it will stick to the plan to end a $1.25 trillion program of mortgage-debt purchases in March. The statement is scheduled for release at 2:15 p.m. New York time.

The Bombay Stock Exchange Sensitive Index lost 2.9 percent before a central bank meeting this week that economists predict will result in higher reserve requirements for banks. Brazil’s central bank will probably signal its readiness to raise borrowing costs after leaving its benchmark interest rate at a record low, economists said before today’s policy meeting.

Rand, Yen

Most developing-nation currencies weakened against the dollar, led by a 1 percent slide in South Africa’s rand as a split vote by the central bank’s Monetary Policy Committee to leave the benchmark interest rate unchanged spurred expectations of a rate cut.

The yen advanced as investors scaled back purchases of higher-yielding currencies. It climbed 0.1 percent against the dollar.

Greek bonds declined after the Finance Ministry in Athens denied a Financial Times report that it plans to sell 25 billion euros ($35 billion) of debt to China as the government struggles to cut the largest budget deficit in the European Union. The extra premium investors demand to hold Greek 10-year bonds instead of benchmark German securities of similar maturity widened 16 basis points to 320 basis points.

The cost of protecting against losses on European corporate bonds using credit-default swaps rose, with the high-yield Markit iTraxx Crossover Index climbing 9 basis points to 448, near the highest level in five weeks, according to JPMorgan Chase & Co.

Deficit Concern

Traders are buying protection against defaults on sovereign debt at more than five times the pace of company bonds, as governments fund ballooning deficits. The net amount of credit- default swaps outstanding on 54 governments from Japan to Italy jumped 14.2 percent since Oct. 9, compared with 2.6 percent for all other contracts, according to Depository Trust & Clearing Corp. data. European countries led the increase, with the amount of protection on Portugal rising 23 percent, Spain 16 percent and Greece 5 percent.

U.K. natural gas for February delivery rose 5.3 percent to its highest price in more than 11 months as forecasts for colder weather boosted demand. Crude oil for March delivery in New York rose 16 cents to $74.87 a barrel. Copper for delivery in three months fell 1.5 percent to $7,270 a metric ton on the London Metal Exchange, leading a retreat in metals. China accounts for more than a quarter of global copper demand.

To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net