Stocks Drop With Euro As Spain Delays Bailout Decision

Global stocks fell for a seventh day, Treasuries rose and the euro slid as German and Asian data spurred concern the economy is weakening and Spain delayed making a decision on seeking a bailout until terms are clear.

The MSCI All-Country World Index slid 0.9 percent at 11:03 a.m. in New York, extending its longest losing streak in seven weeks. The Standard & Poor’s 500 Index lost 0.8 percent and U.S. 10-year Treasury yields decreased three basis points to 1.62 percent. The euro lost 0.3 percent to $1.2496, erasing an earlier gain, and Spain’s 10-year yield surged 14 basis points. Oil fell 1.6 percent as Tropical Storm Isaac weakened.

German unemployment increased for a fifth month, retail sales in Japan fell more than estimated and South Korean manufacturers’ confidence stayed near the lowest level since 2009. U.S. reports showed consumer spending rose less than forecast and inflation slowed as investors awaited Fed Chairman Ben S. Bernanke’s speech tomorrow in Wyoming.

“The main focus is the softer news overseas,” said Michael Strauss, who helps oversee about $26 billion of assets as the chief investment strategist at Commonfund in Wilton,Connecticut. “There’s more of a reality check. Clearly the numbers in the U.S. have gotten a bit better.”

The S&P 500 (SPX) erased yesterday’s 0.1 percent advance as gauges of technology, industrial and energy shares fell more than 1 percent to lead declines today. Sears Holdings Corp. retreated 7.6 percent after S&P said the retailer will leave the benchmark S&P 500 on Sept. 4 because it has too few shares available for trading to be representative of American companies.

Economic Data

U.S. consumer purchases grew 0.4 percent after being little changed in June, Commerce Department figures showed, compared with the median estimate of economists for a 0.5 percent gain in so-called nominal sales. Initial jobless claims were unchanged last week at 374,000.

A gauge of prices tied to consumer spending advanced 1.3 percent in the 12 months ended in July, the smallest gain since October 2009 and below the Fed’s long-run goal of 2 percent, Commerce Department data showed. Excluding food and energy costs, the measure increased 1.6 percent in the past year, the least since September.

The S&P 500 last week climbed to its highest level on an intraday basis in more than four years, then failed to close at that milestone. The index has fluctuated near the 1,400 level for three weeks as trading slowed toward the end of the U.S. summer and investors awaited the Federal Reserve’s annual gathering in Jackson Hole, Wyoming, to gauge prospects for a possible third round of so-called quantitative easing through asset purchases.

Slowing Volume

Volume for exchange-listed stocks in the U.S. was less than 4.5 billion shares yesterday and on Aug. 27, the lowest levels since at least 2008 excluding days surrounding holidays, data compiled by Bloomberg show.

U.S. stocks rose yesterday as the government said the economy grew at a 1.7 percent annual rate in the second quarter, up from an earlier estimate of 1.5 percent, and the Fed’s Beige Book business survey showed the U.S. continued to expand “gradually” in July and early August.

The Stoxx 600 Europe Index (SXXP) fell 0.8 percent for a third day of declines. WPP Plc dropped 2.2 percent after the world’s largest advertising company cut its sales-growth forecast. Hays Plc sank 9.1 percent as the U.K. recruitment company said several markets will probably remain “very challenging” in 2013. Carrefour SA jumped 7.8 percent and Vivendi SA climbed 2.8 percent in Paris after earnings beat analyst estimates.

Spain’s Decision

European shares extended losses as Spanish Prime Minister Mariano Rajoy said the nation will delay deciding whether to seek a sovereign bailout following a meeting with French PresidentFrancois Hollande. Spain’s IBEX-35 Index lost 1.5 percent and Germany’s DAX slid 1.7 percent.

Rajoy and Hollande, who held talks in Madrid today, pressed the European Central Bank to implement decisions from a June summit to reduce borrowing costs in Spain and Italy as euro-area policy makers struggle to enact an emergency plan.

“In the same way as when we asked for the help for the financial sector because we thought it was good for Spain, so that credit recovers and so that there would be economic growth and jobs, when it’s known exactly what’s on offer, I will take a decision,” Rajoy told a joint briefing.

Emerging Markets

Developing-nation (MXEF) equities fell for a fifth day, the longest losing streak in seven weeks. The MSCI Emerging Markets Index lost 0.9 percent. South Korea’s Kospi index dropped 1.2 percent after Bank of Korea confidence index for September was at 75 from 70 the previous month, the only readings below 80 since 2009. The Hang Seng China Enterprises Index (HSCEI) of mainland companies slipped 1.4 percent. Russia’s Micex Index slipped 0.5 percent and India’s Sensex rose 0.3 percent.

The Markit iTraxx Europe index of credit-default swaps linked to 125 investment-grade companies increased five basis points to 152, the highest in more than three weeks. The Markit iTraxx SovX Western Europe index of swaps on 15 governments climbed 2.6 basis points to 234. A rise signals worsening perceptions of credit quality.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson atlthomasson@bloomberg.net

http://www.bloomberg.com/news/2012-08-30/asian-stocks-fall-to-four-week-low-on-growth-concern-oil-drops.html