By Stephen Kirkland and Lynn Thomasson - Jan 4, 2012 10:19 PM GMT+0700
Stocks (SXXP) fell, pulling the Dow Jones Industrial Average down from the highest level since July, as UniCredit SpA’s plan to sell shares fueled concern European banks need to raise capital and U.S. factory orders trailed estimates. The euro weakened, while copper retreated.
The Dow slipped 0.4 percent to 12,353.75 and the Standard & Poor’s 500 Index lost 0.6 percent as of 10:17 a.m. in New York. The Stoxx Europe 600 Index (SXXP) slipped 0.7 percent as UniCredit, Italy’s largest bank, slumped 12 percent. Portugal’s two-year note yield extended declines after borrowing costs dropped at a bill sale. The euro depreciated 1 percent to $1.2926. Copper slid 1.8 percent, while oil fluctuated.
UniCredit said it will sell new shares in a 7.5 billion- euro ($9.8 billion) offer to strengthen its capital position. The European Central Bank reported overnight deposits from financial institutions rose to an all-time high and Luxembourg Prime Minister Jean-Claude Juncker said the European Union is facing a recession of unknown scope. U.S. factory orders increased 1.8 percent in November, trailing the median economist forecast for 2 percent growth.
“The euro-zone is in a long term adjustment process,” Neil Mellor, a strategist at Bank of New York Mellon Corp. in London, said in a report. “Whether certain member states will be prepared to stick it out for the long run should they ride out the liquidity crisis relatively unscathed remains to be seen.”
The S&P 500 retreated from a two-month high as financial shares, the worst-performing industry in 2011, lost 1.4 percent as a group to lead declines. Citigroup Inc. and Bank of America Corp. fell more than 2 percent after surging at least 4.3 percent yesterday.
European Banks
Banks lost 1.7 percent to lead declines in the Stoxx 600. UniCredit tumbled to the lowest level on a closing basis since 1992 as the bank said it will sell shares at 1.943 euros each, offering two for every one held. Vestas Wind Systems A/S (VWS), the world’s biggest wind-turbine maker, plunged 18 percent after cutting its sales forecast.
Next Plc sank 3.7 percent, leading a gauge of retailers lower, as the U.K.’s second-largest seller of clothing reported “disappointing” holiday revenue and forecast slack profit growth next year.
The yield on Portugal’s two-year note dropped 152 basis points. The government sold 1 billion euros of three-month bills at average yield of 4.346 percent, down from 4.873 percent at a previous auction. Germany’s 10-year debt yield was little changed at 1.90 percent, after climbing to 1.94 percent. The government sold 4.06 billion euros of bonds, after getting bids for 5.14 billion euros, more than the maximum sales target of 5 billion euros, at an average yield of 1.93 percent.
Spanish Bonds
The yield on Spain’s 10-year bonds rose 11 basis points, sending the difference in yield with bunds 11 basis points wider. Spanish Prime Minister Mariano Rajoy’s government may apply for loans from the European Union’s rescue fund and the International Monetary Fund to help restructure the country’s financial industry, Expansion reported, citing unidentified people with knowledge of the matter.
Spain has no plans to seek external help to fund its overhaul of the industry, said Carmen Martinez Castro, the deputy minister for communication.
The euro weakened 0.8 percent against the yen. The yen strengthened against all but three of its 16 most-traded peers.
Euro-area banks parked 453.2 billion euros with the Frankfurt-based ECB yesterday, up from 446 billion euros the previous day. That’s the highest since the euro’s introduction in 1999. Banks are depositing excess cash back with the ECB at the overnight rate of 0.25 percent, incurring a loss rather than lending it for more elsewhere.
Record Low
Hungary’s forint fell to as weak as 320.33 against the euro, a record, on speculation that a resumption in talks with the IMF and the European Union on financial assistance will be delayed. The EU currently has no plans to resume aid talks with Hungary, European Commission spokesman Olivier Bailly said yesterday. The BUX Index (BUX) of stocks (SXXP) lost 1.6 percent.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong lost 1.6 percent and the Shanghai Composite Index (SHCOMP) fell 1.4 percent, in its first day of trading for the year. China’s home prices fell for a fourth month in December and Premier Wen Jiabao said business conditions may be “relatively difficult” this quarter. Benchmark indexes gained more than 1 percent in Thailand and Indonesia.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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