European Stocks Retreat From Two-Month High

By Andrew Rummer - Oct 13, 2011 5:31 PM GMT+0700
Enlarge image

A construction worker carries materials on a building site on the Gold Coast in Australia. The Australian dollar climbed 0.4 percent to $1.0195 after earlier rising to $1.0233 after the unemployment rate fell for the first time since March. Photographer: Patrick Hamilton/Bloomberg

Play Video

Oct. 13 (Bloomberg) -- Kit Juckes, head of foreign-exchange research at Societe Generale SA, talks about currency markets. He speaks with Linzie Janis and David Tweed on Bloomberg Television's "Countdown." (Source: Bloomberg)

European stocks fell from a two- month high, U.S. futures dropped and the euro weakened as the European Central Bank said forcing investors to take losses in bailouts is a risk to financial stability. Base metals slid.

The Stoxx Europe 600 Index sank 1.1 percent at 11:31 a.m. in London, after closing yesterday at the highest level since Aug. 4. Standard & Poor’s 500 futures slipped 0.5 percent. The euro depreciated 0.9 percent versus the yen and 0.4 percent against the dollar. Copper lost 1.9 percent. The cost of insuring against default on European government bonds rose.

The ECB said the involvement of the private sector in euro- area bailouts through enforced investor losses would have “direct negative effects” on banks. European Commission President Jose Barroso will speak today in Brussels after calling yesterday for a “coordinated approach” to recapitalize the region’s lenders.

“Any disagreements on how we come out of this crisis will generate pressure on markets and specifically on the financial sector,” said Luis Benguerel, a trader at Interbrokers in Barcelona, Spain. “We are coming from a solid rally in recent days on the hopes that the debt crisis may be nearing a resolution. Anything that may divert that process will generate renewed instability.”

Carrefour Forecast

Three stocks declined for every one that gained in the Stoxx 600. Carrefour SA (CA) sank 4.9 percent as the world’s second- largest retailer lowered its 2011 profit forecast for the second time in three months. Anglo American Plc led a retreat in mining companies, sliding 4.1 percent.

The drop in S&P 500 futures indicated the U.S. gauge will snap a three-day, 4.5 percent rally. JPMorgan Chase & Co. (JPM) may say today profit slid 10 percent in the third quarter, the biggest decline in more than two years, according to estimates from analysts surveyed by Bloomberg.

Minutes from the Federal Reserve’s Sept. 20-21 meeting, released yesterday, showed policy makers saw “considerable uncertainty” that U.S. growth will pick up. Most participants favored giving additional information on the central bank’s goals and how they influence decisions, and most “saw advantages” in tying the Fed’s near-zero interest rates to more-specific developments in the economy.

U.S. Trade Gap

A report today may show the U.S. trade deficit increased 2.2 percent to $45.8 billion in August as a cooling in the global economy prompted companies to ship fewer goods abroad, according to the median of 81 forecasts in a Bloomberg survey. Other data may show jobless-benefit claims rose last week.

“The market over the next few days may be due for a bit of a correction as we’ve had many days of gains,” Mohammed Apabhai, head of Asia trading at Citigroup Inc., said in a Bloomberg Television interview in Hong Kong. “If things do go wrong, markets remain massively vulnerable, but we’re not expecting that. Of course everything hinges on what comes out of Europe.”

U.S. 10-year Treasuries rose, snapping a six-day decline, pushing the yield down four basis points to 2.17 percent. German bunds advanced for the first time in seven days, driving the 10- year yield down five basis points to 2.14 percent.

Italian 10-year bonds fell for a fifth day, pushing the yield up to the highest since August, as the nation sold debt maturing in 2016 and 2015. The yield climbed nine basis points to 5.83 percent.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed two basis points to 323. An increase signals worsening perceptions of credit quality.

Berlusconi Confidence Vote

Italian Prime Minister Silvio Berlusconi called for a confidence vote in Parliament to prove he has enough support to rule after failing to muster a majority on a legislative ballot this week. While the vote has yet to be scheduled, Berlusconi’s allies have indicated it may be tomorrow.

The euro declined 0.4 percent to $1.3730 and 0.9 percent to 105.56 yen. The Japanese currency rose 0.5 percent to 76.90 per dollar, strengthening versus all 16 major counterparts.

Copper dropped 1.9 percent to $7,380 a metric ton and oil in New York fell 1.7 percent to $84.14 a barrel. Raw sugar jumped 1.6 percent to 26.43 cents a pound as Thailand, the world’s second-biggest exporter of sugar, said floods may last until the end of the month.

The MSCI Emerging Markets Index advanced 0.5 percent, extending a six-day, 11 percent advance, the longest since April 6. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 3.7 percent, taking a rebound from its Oct. 4 low to 21 percent.

The Shanghai Composite Index gained 0.8 percent after China’s State Council said it will provide financial support and preferential tax policies for small companies. Poland’s WIG20 Index lost 1.5 percent, led by a 3.6 percent decline in KGHM Polska Miedz SA, the country’s only copper producer. The Micex Index retreated 0.9 percent in Moscow.

To contact the reporter on this story: Andrew Rummer in London at arummer@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net