Stocks Retreat on Economic Growth Concern

By Daniel Tilles and Shiyin Chen - Sep 30, 2011 9:02 PM GMT+0700

Stocks fell, dragging the MSCI All- Country World Index to its biggest quarterly loss since 2008, while the yen and dollar strengthened as declines in Chinese manufacturing and German retail sales signaled global growth is slowing. Treasuries rose, and oil declined.

The MSCI All-Country World Index slid 2 percent at 10 a.m. New York time, extending its decline since June 30 to 18 percent. The Standard & Poor’s 500 Index slipped 1.7 percent as six of 10 industry groups lost more than 1.8 percent. The Stoxx Europe 600 Index retreated 2.1 percent, with Societe Generale SA dropping 8.8 percent. The yen rose against its 16 major peers. The dollar gained 1.2 percent versus the euro. Treasury 10-year notes snapped a five-day drop. Oil fell 2.1 percent.

Chinese manufacturing shrank a third month, the longest streak since 2009. German sales fell the most in more than four years, while European inflation unexpectedly quickened to the fastest in almost three years. Japanese industrial production grew less than economists forecast. The S&P 500 maintained losses after the Institute for Supply Management-Chicago Inc.’s business barometer and Thomson Reuters/University of Michigan gauge of consumer confidence beat projections.

“The situation is quite dark,” said Philipp Musil, who helps manage about $11 billion at Semper Constantia Privatbank AG in Vienna. “We’re very cautious about equities. All in all the figures are not good and many investors think we’re going straight into a recession.”

Morgan Stanley

Morgan Stanley slumped 6.9 percent. The owner of the world’s largest retail brokerage is being priced in the credit- default swaps market as less creditworthy than most U.S., U.K. and French banks and as risky as Italy’s biggest lenders. Goldman Sachs Group Inc. shares lost 3 percent. Deutsche Bank AG lost 6.6 percent as Handelsblatt reported that Germany’s biggest lender may lower its profit target.

The S&P 500 extended this quarter’s slide to 13 percent. Futures on the index maintained losses today after U.S. consumer spending increased 0.2 percent in August, matching the median economist projection in a Bloomberg survey. Growth slowed from the 0.7 percent increase in July.

“The U.S. economy is tipping into a new recession,” Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, said today during a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “You have wildfire among the leading indicators across the board. Non- financial services plunging, manufacturing plunging, exports plunging. That is such a deadly combination.”

Yen, Euro

The yen climbed 1.2 percent against the euro. The Dollar Index, which tracks the U.S. currency against those of six trading partners, gained 0.8 percent. The Japanese and U.S. currencies are the best performers this quarter among the 10 tracked by Bloomberg Correlation-Weighted Currency Indexes, gaining 12 percent and 6.7 percent, respectively.

Japan’s factory output increased 0.8 percent in August from July, the trade ministry said in Tokyo today, missing the 1.5 percent median estimate of 28 economists surveyed by Bloomberg News. South Korean industrial production rose 4.8 percent from a year earlier, trailing the median 6.1 percent gain forecast in a separate Bloomberg survey. The won weakened 0.4 percent to 1,178.10 per dollar, completing its largest monthly loss since February 2009.

Treasury 10-year yields fell nine basis points to 1.91 percent. The yield on the German bund declining 13 basis points.

Oil fell 2.1 percent to $80.45 a barrel in New York.

The MSCI Emerging Markets Index dropped 2 percent, heading for the biggest monthly retreat since October 2008. China’s Shanghai Composite Index slipped 0.3 percent to the lowest level since April 2009, while Russia’s Micex Index sank 4.3 percent. The ruble weakened 0.9 percent against the dollar.

To contact the reporters on this story: Daniel Tilles in London at dtilles@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net