European Stocks Decline on Economic Outlook; Copper Retreats
January 19, 2012, 8:05 PM ESTBy Stephen Kirkland and Lynn Thomasson
Jan. 18 (Bloomberg) -- European stocks fell from a five- month high and commodities declined as the World Bank cut its global growth forecast by the most in three years. Portugal’s two-year notes retreated before a bill auction.
The Stoxx Europe 600 Index slid 0.3 percent at 9:40 a.m. in London as basic-resources companies, automakers and banks retreated. Standard & Poor’s 500 Index futures swung between gains and losses. Copper slipped 0.9 percent and natural gas declined for a seventh consecutive day. Portuguese two-year yields rose seven basis points to 15.28 percent.
The global economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, and the euro area may contract 0.3 percent, the World Bank said today. Greece is close to a deal with private creditors that would give them cash and securities with a market value of about 32 cents per euro of government debt, according to Bruce Richards, who is on the creditors’ committee and chief executive officer for Marathon Asset Management LP.
“The euro zone is a huge part of the global economy, the inter-linkages are very strong,” John Wraith, a fixed-income strategist at Bank of America Merrill Lynch, said in an interview on Bloomberg Television’s “Countdown.” “If things rapidly deteriorate it is going to take a lot of the rest of the global economy with it.”
Fitch Ratings may downgrade Italy by two levels by the end of January, news agency Ansa reported, citing Alessandro Settepani, a senior Fitch director, who spoke on the sidelines of a conference in Milan today.
Volkswagen Falls
The Stoxx 600 retreated from the highest level since Aug. 4. ThyssenKrupp AG, Germany’s largest steelmaker, sank 3 percent, leading basic-resources shares lower. Volkswagen AG, Europe’s biggest carmaker, dropped 1.2 percent. Commerzbank AG, Germany’s second-largest lender, slid 4.3 percent after Moody’s Investors Service cut its financial-strength rating.
Futures on the S&P 500 pared an earlier gain of 0.4 percent. Data from the Federal Reserve at 9:15 a.m. New York time may show U.S. industrial production increased 0.5 percent in December after a 0.2 percent drop the prior month, according to the median estimate of 80 economists in a Bloomberg survey.
Goldman Sachs Group Inc., EBay Inc. and Charles Schwab Corp. are among U.S. companies scheduled to report fourth- quarter results today. S&P 500 companies, which beat profit estimates in the previous 11 quarters, probably will report a 4.6 percent increase in per-share earnings during the September- December period, according to analysts’ estimates compiled by Bloomberg.
Portuguese Auction
Portuguese 10-year yields rose one basis point to 14.26 percent. The government plans to auction as much as 2.5 billion euros ($3.2 billion) of 91- 182- and 336-day treasury bills. Spanish 10-year yields climbed five basis points to 5.18 percent.
German two-year yields were little changed at 0.18 percent, within five basis points of a record low, before the nation sells as much as 4 billion euros of the securities. Ten-year German yields fell one basis point to 1.78 percent. Equivalent- maturity U.S. Treasury yields also declined one basis point, to 1.85 percent.
The cost of insuring against default on European corporate debt fell to the lowest in 2 1/2 months. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped three basis points to 688, the lowest since Oct. 31.
The euro rose 0.2 percent to $1.2757 and was little changed at 97.86 yen. The dollar weakened 0.2 percent to 76.70 yen.
The S&P GSCI gauge of 24 commodities fell 0.2 percent. Natural gas slid 0.5 percent to $2.475 per a million British thermal units, extending the longest falling streak since May 2010.
--With assistance from Matthew Brown, Claudia Carpenter, Will Hadfield and Abigail Moses in London. Editors: Stephen Kirkland, Justin Carrigan
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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: Stuart Wallace at Swallace6@bloomberg.net
