By Tom Stoukas - Jun 20, 2013 11:07 AM GMT+0400
A trader monitors financial data on his computer screens beneath a display of the DAX Index curve at the Frankfurt Stock Exchange. Photographer: Ralph Orlowski/Bloomberg
European stocks sank after Federal Reserve Chairman Ben S. Bernanke said the bank may end bond purchases next year if the economy strengthens in line with forecasts. U.S. index futures and Asian shares slid.
Mining companies led losses as a gauge of Chinese manufacturing fell. Lloyds Banking Group Plc dropped 1.6 percent after U.K. Chancellor of the Exchequer George Osborne said the government may sell shares in the bank.
A trader monitors financial data on his computer screens beneath a display of the DAX Index curve at the Frankfurt Stock Exchange. Photographer: Ralph Orlowski/Bloomberg
The Stoxx Europe 600 Index (SXXP) fell 1.5 percent to 287.86 at 8:05 a.m. in London, the biggest decline in a week. The gauge has lost 7.3 percent since May 22, when Bernanke said the U.S. central bank could pare stimulus measures as the economy heals. Standard & Poor’s 500 Index futures lost 0.5 percent after the U.S. gauge dropped the most in two weeks yesterday. The MSCI Asia Pacific Index (MXAP) plunged 3.8 percent, on course for the largest decline since September 2011.
“The extreme levels of support provided by central banks to risk assets may be nearing a turning point,” Dennis Jose, an equity strategist at Barclays Plc in London, wrote in a report today. “Our economists now expect the Fed to start tapering asset purchases in September 2013. We advise caution near term, though the current high equity risk premium should cushion against an excessive decline in sentiment.”
The Fed will probably taper its stimulus measures later in 2013 and halt bond purchases around mid-2014 as long as the world’s largest economy performs in line with Fed projections, Bernanke told reporters yesterday in Washington after a two-day meeting of the Federal Open Market Committee.
Fed Support
The central bank said it will keep buying bonds at a pace of $85 billion a month, and repeated that it’s prepared to increase or reduce the pace of purchases depending on the outlook for the job market and inflation.
U.S. reports today may show home sales climbed and jobless-benefit claims were little changed. Purchases of previously owned houses probably climbed 0.6 percent in May to a 5 million annualized rate, according to the median forecast of economists surveyed by Bloomberg ahead of data from the National Association of Realtors. Jobless claims rose to 340,000 last week from 334,000 the period before, economists said.
BHP Billiton Ltd. and Rio Tinto Group, the world’s largest mining companies, lost 3.3 percent to 1,752 pence and 3.2 percent to 2,710.5 pence.
The preliminary reading of a Chinese purchasing managers’ index for June released today by HSBC Holdings Plc and Markit Economics was 48.3, missing economists’ estimates of 49.1. A number below 50 indicates contraction.
Lloyds, RBS
Lloyds fell 1.6 percent to 60.8 pence after Osborne said the government is “actively considering” selling shares in the bank. The announcement comes after a parliamentary report published yesterday said Lloyds, which is 39 percent owned by the government, was better placed thanRoyal Bank of Scotland Group Plc to return to private hands.
Osborne said the Treasury will “urgently” investigate the case for breaking up RBS and hiving off its toxic assets into a so-called bad bank. RBS declined 2 percent to 313 pence.
Aberdeen Asset Management Plc (ADN), Scotland’s largest money manager, lost 2.8 percent to 388.9 pence as Goldman Sachs Group Inc. downgraded the stock to neutral from buy.
To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
