By
Shiyin Chen
Stocks dropped, the euro weakened
against the dollar and yen, and gold rallied to a six-week high
as concern Italian Prime Minister Silvio Berlusconi will fail to
muster a majority for a parliamentary vote tomorrow overshadowed
Greece’s plans to form a unity government. The Swiss franc sank.
The MSCI All Country World Index slipped 0.4 percent and
the Stoxx Europe 600 Index decreased 1 percent at 8:02 a.m. in
London. Standard & Poor’s 500 Index futures dipped 1 percent.
The 17-nation euro weakened 0.4 percent to $1.3727 and lost 0.5
percent to 107.34 yen. The franc slumped after the central bank
signaled it is ready to act if the currency’s strength threatens
Switzerland’s economy. Italian 10-year bond yields jumped to a
euro-era record. Gold rose 0.8 percent.
Italy’s parliament will vote tomorrow on the 2010 budget
report amid an unraveling of Berlusconi’s majority and a surge
in the nation’s borrowing costs. Greek Prime Minister George
Papandreou agreed to step down as a new government is created to
secure international financing and avert a collapse of its
economy. European finance chiefs will meet in Brussels today to
work on details of a plan to bulk out the region’s bailout fund.
“It’s a short-term fix but even a new government needs to
cut spending, increase taxes and get their house in order, so
it’s not over yet,” said Kumar Palghat, managing director and
founder of Kapstream Capital Pty, referring to Greece. “The
next step is what happens in Italy. We’re really not out of the
woods yet when it comes to Europe,” he said in a Bloomberg
Television interview from Sydney.
Greece, Italy
About six shares retreated for every one that gained on the
Stoxx 600. Italy’s benchmark FTSE MIB Index slumped 1.6 percent,
Germany’s DAX Index lost 1 percent and France’s CAC 40 decreased
1.5 percent.
The euro weakened 2.5 percent last week on Papandreou’s
decision to put the terms of the European Union’s rescue plan to
a referendum. Two Berlusconi allies defected to the opposition
last week and a third quit yesterday. Six others called for the
Prime Minister to resign and seek a more broadly backed
government in a letter to newspaper, Corriere della Sera.
Investor concern about Italy’s ability to cut the region’s
second-biggest debt load sent the yield on the nation’s 10-year
bond 20 basis points higher to 6.57 percent. The difference in
yield, or spread, with benchmark German bunds also widened to a
euro-era record.
“The market’s focus is shifting to Italy,” said Yunosuke Ikeda, an analyst of foreign-exchange research at Nomura
Securities Co. “Yields on Italian bonds may continue to rise
unless Berlusconi resigns. The euro is likely to inch lower amid
the flow of rather bad news out of Europe.”
Government Intervention
The Swiss franc weakened against all 16 major peers after
central bank President Philipp Hildebrand said in an interview
with NZZ am Sonntag newspaper that policy makers expect the
currency to depreciate further. It depreciated 0.9 percent to
1.2305 per euro.
Concern that Europe’s sovereign-debt crisis will spread and
global economic growth is slowing has buoyed demand for havens
such as the franc and yen, spurring Swiss and Japanese
policymakers to intervene in currency markets. The yen climbed
0.1 percent to 78.16 per dollar, after advancing to a post-World
War II record on Oct. 31.
About four shares retreated for every three that gained on
MSCI’s Asia Pacific Index, which sank 0.4 percent. Japan’s
Nikkei 225 Stock Average slid 0.4 percent, Australia’s S&P/ASX
200 Index decreased 0.2 percent, while Hong Kong’s Hang Seng
Index slid 0.9 percent. Markets in India, Singapore, Malaysia
and the Philippines are closed for a holiday today.
Stocks Fall
Asics Corp. tumbled 11 percent in Tokyo after the sporting
goods maker cut its full-year net-income forecast. Furukawa
Electric Co. slumped 12 percent after the cable maker forecast a
full-year loss.
Futures on the S&P 500 signal the U.S. stocks gauge may
extend the Nov. 4 drop of 0.6 percent. Treasury 10-year yields
fell two basis points to 2.02 percent, extending the four basis
point decrease on Nov. 4. The U.S. Treasury Department plans to
sell $72 billion of notes over three days this week, beginning
with tomorrow’s sale of three-year debt.
Gold for immediate-delivery climbed as much as 1.1 percent
to $1,773.35 an ounce before trading at $1,770.20. Oil retreated
0.3 percent to $93.97 a barrel in New York, reversing an earlier
gain of as much as 0.7 percent. Three-month copper sank 0.9
percent to $7,800 a metric ton in London.
To contact the reporter on this story:
Shiyin Chen in Singapore at
schen37@bloomberg.net
To contact the editor responsible for this story:
Shelley Smith at
ssmith118@bloomberg.net
