By Stephen Kirkland and Shiyin Chen - Nov 7, 2011 7:26 PM GMT+0700
Nov. 7 (Bloomberg) -- John Woods, chief Asian strategist at Citigroup Inc.'s private bank, talks about Europe's debt crisis and its implications for Asia's financial markets. Woods speaks with Susan Li, Rishaad Salamat, John Dawson and Zeb Eckert on Bloomberg Television's "Asia Edge." (Source: Bloomberg)
Nov. 7 (Bloomberg) -- Robert Minikin, a senior foreign-exchange strategist at Standard Chartered Plc in Hong Kong, talks about the potential for intervention by the Chinese government in the European sovereign-debt crisis and the outlook for the yuan. Minikin also discusses the Group of 20 nations' summit last week. He speaks with Rishaad Salamat on Bloomberg Television's "One the Move Asia." (Source: Bloomberg)
Nov. 7 (Bloomberg) -- David Blanchflower, a professor at Dartmouth College and Bloomberg Television contributing editor, talks about reports that Italy's Prime Minister Silvio Berlusconi may resign. Giuliano Ferrara, editor of newspaper Il Foglio and a former Berlusconi spokesman, reported today that the premier may step down within hours and push for early elections. Blanchflower speaks with Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Stocks fell, the euro weakened and Italy’s borrowing costs climbed to a record as concern Prime Minister Silvio Berlusconi will fail to win a majority for a parliamentary vote overshadowed Greece’s plan to form a unity government. Gold rose to a six-week high.
The Stoxx Europe 600 Index decreased 0.5 percent at 7:22 a.m. in New York, paring earlier declines of as much as 1.8 percent after a report that Berlusconi might resign. Standard & Poor’s 500 Index futures lost 0.6 percent. The euro dropped 0.3 percent to $1.3753, and the Swiss franc depreciated against all 16 of its most-traded peers. The yield on the 10-year Italian bond climbed to 6.68 percent. Gold jumped 0.5 percent.
Italy’s parliament will vote tomorrow on the 2010 budget report as Berlusconi’s majority unravels. Greek Prime Minister George Papandreou agreed yesterday to step down, paving the way for the formation of a new government to get international financing. European finance chiefs will meet in Brussels today to work on a plan to raise the region’s bailout fund.
“The crisis has shifted from Greece to Italy and this is a domino that would not fall quietly,” Kit Juckes, the head of foreign-exchange research at Societe Generale SA in London, wrote today in a report. “It is impossible to see what can be done to restore Italian confidence, other than rebuild confidence in Italian public finances, and that is a Herculean task.”
Carrefour Downgrade
Three shares retreated for every two that gained on the Stoxx 600. Carrefour SA dropped 3.9 percent after Citigroup Inc. lowered its recommendation for the world’s second-biggest retailer to “sell” from “neutral.” Sandvik AB, the largest maker of metal-cutting tools, sank 2.7 percent after offering 6.19 billion kronor ($933 million) to buy the remaining shares of its subsidiary Seco Tools AB.
Stocks and bonds pared losses after Giuliano Ferrara, editor of newspaper Il Foglio and a former Berlusconi spokesman, reported that the premier may step down within hours and push for early elections. Berlusconi denied he’s stepping down, Ansa said, citing comments from the premier.
Futures on the S&P 500 signaled the U.S. stocks gauge may extend last week’s 2.5 percent drop.
Italy’s 10-year bond yield traded 21 basis points higher at 6.58 percent, after climbing as much as 31 basis points. The extra yield investors demand to hold Italian 10-year bonds instead of German bunds, the euro region’s benchmark government securities, widened to as much as 491 basis points, or 4.91 percentage points, the most since the introduction of the euro in 1999, before trading at 474 basis points.
Allies Defected
Two Berlusconi allies defected to the opposition last week, and a third quit late yesterday. Six others called for Berlusconi to resign and seek a broader coalition in a letter to newspaper Corriere della Sera. More than a dozen more are ready to ditch the premier’s coalition, Repubblica daily reported yesterday, without citing anyone.
The yield on the Greek bond due in October 2022 rose 79 basis points, climbing for the sixth straight day, while the two-year note yield surged to a euro-era record. Papandreou and Antonis Samaras, head of the main opposition party, agreed to form a government to lead Greece “to elections immediately after the implementation of European Council decisions on Oct. 26,” according to an e-mail from the office of President Karolos Papoulias in Athens.
The yield on the German bund declined two basis points, while the French 10-year yield rose nine basis points, driving the difference in yield between the two securities 11 basis points higher to 133, less than 10 basis points from the widest in the euro’s history. The cost of insuring European sovereign debt rose, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments climbing eight basis points to 331, the highest since Nov. 1.
Ready to Act
The euro weakened 0.4 percent versus the yen.
The Swiss franc slid 1.1 percent versus the 17-nation euro and the dollar. Policy makers remain ready to act in case the franc’s strength increases the risk of deflation and threatens the country’s economy, Swiss National Bank President Philipp Hildebrand told NZZ am Sonntag newspaper in an interview conducted Nov. 2 and published yesterday.
Gold jumped as much as 1.1 percent to $1,773.35 an ounce, the highest since Sept. 22. Lead, zinc, and nickel decreased at least 0.9 percent. German industrial production slipped 2.7 percent in September, more than the 0.9 percent decline predicted by 37 economists in a Bloomberg survey. Germany is the third-largest user of copper, after China and the U.S.
The MSCI Emerging Markets Index lost 0.4 percent. Hungary’s BUX slid 0.9 percent. The Shanghai Composite Index slipped 0.7 percent, and South Korea’s Kospi Index (KOSPI) decreased 0.5 percent. Markets in India, Turkey, Malaysia and the Philippines were closed for a holiday.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
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