Thursday, 12 July 2012

Stocks Fall On Global Growth Concern As Yen, Bonds Rally

By Stephen Kirkland and Richard Frost - Jul 12, 2012 1:53 PM GMT+0400
Stocks (MXWD) dropped for a seventh day, extending the longest losing streak since November, on concern the global recovery is faltering. The yen rallied and government borrowing costs from Germany to South Korea declined to records.
The MSCI All-Country World Index lost 0.6 percent at 10:45 a.m. in London. Standard & Poor’s 500 Index futures slid 0.5 percent after the U.S. gauge closed little changed yesterday. Germany’s two-year note yield fell to a record minus 0.024 percent, with 10-year U.S. Treasuryyields within five basis points of the lowest ever. The yen strengthened more than 0.5 percent against all 16 of its major peers. Oil slipped 0.9 percent and silver slumped 1.1 percent.
A man looks at an electronic stock board outside a securities firm in Tokyo, Japan. Photographer: Kiyoshi Ota/Bloomberg
Kim Choong Soo, governor of the Bank of Korea, and his board lowered the benchmark seven-day repurchase rate by 25 basis points to 3 percent. Photographer: Jean Chung/Bloomberg
The Australian dollar slid 0.6 percent to $1.0192. Photographer: Brendon Thorne/Bloomberg
South Korea lowered interest rates today for the first time in more than three years and Australian employers unexpectedly cut payrolls. Manufacturing output in the euro area rebounded in May as growth in Germany offset a decline in France. Minutes from the Federal Reserve’s June meeting showed yesterday that only two policy makers backed more bond purchases to bolster growth.
“The global economy is deteriorating faster than central banks can ease policy,” said Tomomi Yamashita, a senior fund manager in Tokyo at Shinkin Asset Management Co., which oversees about $6.3 billion. “Your best bet is to hold on to cash.”
The Stoxx Europe 600 Index fell 0.7 percent, paring declines of as much as 1.1 percent. Temenos Group AG plunged 21 percent to a three-year low after the Swiss maker of banking software cut its revenue-growth forecast and said Chief Executive Officer Guy Dubois will leave. Aegis Group Plc surged 45 percent as the U.K. advertising company agreed to be bought by Japan’s Dentsu Inc. in a 3.16 billion-pound ($4.9 billion) deal.

Jobless Claims

Futures on the S&P 500 erased an earlier advance of as much as 0.2 percent. A Labor Department report at 8:30 a.m. in Washington may show that initial claims for jobless benefits fell to 370,000 last week from 374,000 the prior period, according to forecasts from 47 economists compiled by Bloomberg.
The MSCI Emerging Markets Index (MXEF) sank 1.7 percent, its biggest intra-day decline since June 22. The Kospi Index fell 2.2 percent and the won weakened 0.9 percent, the most since May 16, after the Bank of Korea cut borrowing costs for the first time in more than three years, saying the economy is growing less than expected. Chinese stocks listed in Hong Kong slid 2.2 percent and benchmark indexes fell more than 1 percent in Russia, Turkey and India.

Record-Low Yields

The yield on Australia’s one-year note declined as much as 12 basis points and touched a record low of 2.313 percent. Yields on South Korea’s debt due March 2017 slid 25 basis points to 3.08 percent in Seoul, Korea Exchange Inc. prices show. That’s the lowest level since Bloomberg started compiling Korean bond rates in 2000.
The yield on 10-year Treasury notes fell three basis points, or 0.03 percentage point, to 1.49 percent, approaching the June 1 all-time low of 1.4387 percent.
Austrian five-year yields fell to as low as 0.73 percent and similar-maturity French yields dropped to 0.89 percent, both records. Belgian 10-year rates tumbled to 2.64 percent and Dutch two-year yields reached 0.014 percent, all-time lows.
The European Central Bank said overnight deposits of financial institutions dropped to 324.9 billion euros, the lowest level in almost seven months after policy makers said last week they would no longer pay interest for the funds.
The euro fell 0.1 percent to $1.2222 and reached $1.2208, the lowest since July 1, 2010. It fell 0.7 percent against the yen and the dollar weakened 0.5 percent versus the yen.
Oil in New York fell to $85.08 a barrel and silver slipped to $26.83 an ounce. The S&P GSCI gauge of 24 commodities retreated 0.6 percent.
Cocoa futures dropped 3.1 percent in New York after European bean usage declined 18 percent to a three-year low in the second quarter. Corn climbed 1.5 percent to $7.1425 a bushel after Goldman Sachs Group Inc. and Citigroup Inc. raised their price forecasts because of U.S. crop damage from the worst drought since 1988.
To contact the reporters on this story: Stephen Kirkland in London at
Richard Frost in Hong Kong at
To contact the editor responsible for this story: Justin Carrigan at