18/10 Stocks, Euro Fall as Germany Damps Optimism

By Rob Verdonck and Rita Nazareth - Oct 18, 2011 12:05 AM GMT+0900

BP Plc appreciated 5.5 percent after saying Anadarko Petroleum Corp. will pay $4 billion to settle all claims over the world’s largest accidental oil spill. Photographer: Jason Alden/Bloomberg
Oct. 17 (Bloomberg) -- Simon Derrick, chief currency strategist at Bank of New York Mellon Corp., talks about the outlook for the pound and euro. Derrick also discusses the prospect for a solution to the European sovereign debt crisis with Linzie Janis and David Tweed on Bloomberg Television's "First Look." (Source: Bloomberg)
Oct. 17 (Bloomberg) -- Carl Weinberg, founder and chief economist at High Frequency Economics, talks about German spokesman Steffen Seibert's remarks that the European debt crisis won't be fixed at an Oct. 23 summit and is likely to extend "well into next year." Weinberg speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Oct. 17 (Bloomberg) -- Andrew Freris, senior investment strategist for Asia at BNP Paribas Wealth Management, talks about global financial markets, economies, and Europe's sovereign debt crisis. Freris speaks in Hong Kong with Susan Li, Rishaad Salamat, Angie Lau, and John Dawson on Bloomberg Television's "Asia Edge." (Source: Bloomberg)
Oct. 17 (Bloomberg) -- Arnout Van Rijn, the chief investment officer for Robeco Groep NV's Hong Kong division, talks about Asian stock markets. Van Rijn also discusses Europe's sovereign debt crisis and China's economy. He speaks with Susan Li on Bloomberg Television's "First Up." (Excerpt. Source: Bloomberg)
Oct. 17 (Bloomberg) -- Mike Werner, a bank analyst at Sanford C. Bernstein & Co. in Hong Kong, talks about the Chinese banking industry. China’s state-run Central Huijin Investment started buying shares in the nation’s four biggest banks on Oct. 10 and plans to continue with "related market operations," according to a statement on its website. Werner speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Global stocks and the euro fell, retreating after their best weekly gains in more than two years, as Germany damped expectations for a fast resolution to Europe’s debt crisis and a report showed New York-area manufacturing shrank more than forecast.
The Standard & Poor’s 500 Index dropped 1.2 percent to 1,210.41 at 11:04 a.m. in New York as Wells Fargo & Co. tumbled after reporting a drop in revenue. The MSCI All-Country World Index slipped 0.7 percent following last week’s 5.4 percent rally. The euro, which strengthened 3.8 percent versus the dollar last week, weakened 0.8 percent against the U.S. currency today. Oil lost 0.5 percent at $86.33 a barrel in New York, reversing an earlier 1.6 percent advance.
Equities and the euro headed lower as Steffen Seibert, GermanChancellor Angela Merkel’s chief spokesman, said European Union leaders won’t provide the quick ending to the debt crisis that global policy makers are pushing for at an Oct. 23 summit. Optimism that the region was developing a plan to help banks weather losses on sovereign debt propelled gains in stocks and the euro last week.
“It’s optimism punctuated by reality,” said Hayes Miller, the Boston-based head of asset allocation in North America at Baring Asset Management Inc., which oversees $51.6 billion. “It’s not in the Germans’ interest to offer up a bailout package on the terms that the market would like.”
Finance ministers and central bankers from the Group of 20 nations concluded weekend talks in Paris by endorsing parts of Europe’s emerging plan to avoid a Greek default, bolster banks and curb contagion. They set the Oct. 23 meeting of European leaders in Brussels as the deadline.

Retreat After Weekly Rally

The S&P 500 fell after last week’s 6 percent jump, its best since July 2009. Wells Fargo slumped 6 percent as the largest U.S. home lender reported a drop in third-quarter revenue and narrower margins, even as profit climbed 22 percent to a record $4.06 billion. Citigroup Inc. rose 0.9 percent after profit rose 74 percent, beating analysts’ estimates, following a $1.9 billion accounting gain that reduced the impact of lower trading and investment-banking revenue.
3M Co., United Technologies Corp. and Boeing Co. lost at least 1.3 percent to lead declines in the Dow Jones Industrial Average. Apple Inc. rose after selling more than 4 million iPhone 4S devices in the first three days it was introduced. El Paso Corp. (EP) surged 24 percent as Kinder Morgan Inc. agreed to buy the company for $21.1 billion in a deal that would create the largest U.S. natural-gas pipeline network.
International Business Machines Corp. will report earnings after the close of trading.

Economic Data

The Federal Reserve Bank of New York’s general economic index rose to minus 8.5 from minus 8.8 in September. Economists projected an improvement to minus 4, based on the median forecast. Readings less than zero signal companies in the New York, northern New Jersey, and southern Connecticut region are cutting back. A separate report showed U.S. industrial production advanced 0.2 percent in September on growing demand for automobiles and computers, matching economists’ estimates.
About nine stocks declined for each that gained in the Stoxx Europe 600 Index, which retreated after gaining for three straight weeks. Automobile companies led losses, with Daimler AG and Bayerische Motoren Werke AG down more than 3 percent. BP Plc appreciated 2.1 percent after saying Anadarko Petroleum Corp. will pay $4 billion to settle all claims over last year’s oil spill in the Gulf of Mexico.
The yield on 10-year Spanish bonds advanced for a sixth day, adding seven basis points to 5.32 percent.
The yield on the Portuguese 10-year security rose 16 basis points to 11.80 percent, with seven days of losses in the bond driving the level up from 11.21 percent. The yield on the U.S. 30-year Treasury bond fell five basis points to 3.18 percent. The euro weakened to $1.3765 and was lower against 11 of its 16 most-traded peers.

Emerging Markets

The MSCI Emerging Markets Index increased 0.4 percent, on course for its ninth straight gain, the longest winning streak in 16 months. The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong climbed 2.8 percent and the Kospi Index (KOSPI) jumped 1.6 percent in Seoul. South Korea’s won climbed against all 16 major peers.
South Korean Finance Minister Bahk Jae Wan said at the Paris meeting the Asian nation’s economy is performing better than expected, while data tomorrow may show China’s gross domestic product increased 9.3 percent in the third quarter from a year earlier, according to the median estimate of 22 economists surveyed by Bloomberg. That would be the ninth consecutive quarter of expansion above 9 percent.
A U.S. Senate vote to punish China for depressing its currency is the latest legislative ritual in which the message may be as important as the proposed sanction. U.S. House Speaker John Boehner practically declared the measure dead on arrival in the Republican-run chamber after the Senate’s 63-35 vote last week to let U.S. manufacturers seek duties on Chinese imports if they prove they were harmed by manipulation of the yuan. Boehner, of Ohio, voiced “grave concerns” the measure may trigger a trade war.
To contact the reporters on this story: Rob Verdonck in London at rverdonck@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Mark Gilbert at magilbert@bloomberg.net

SHOWING 5 COMMENTS ON Stocks, Euro Fall as Germany Damps Optimism

  • The problem is that Merkel talks more than she does. We miss leaders all over the World.
  • David 1 hour ago
    Very simple. The G20 and especially US tried to con EU to produce a concrete solution to resolve Euro crisis. Who else have money in EU? only Germany. So she is trying to kick the can further down the road and not picking it up
  • MrWiseOwl 1 hour ago
    The Greek government has not laid off ONE government employee since their crisis began.

    Not one.

    They evidently need to learn the hard way.

  • Its not the first time Greek betrayed us all. They have done this before and here again. European needs to stand up and push them to file bankruptcy or bail them again? Wait, if we don't then we will never get what we lent them. So, the only choice is either bail them or say screw them. Its a double edge sword. My concern is how do you trust Greek when they have exploited the sytem again; its in their blood........
  • theSavage 1 hour ago
    World leaders I don't think want it to get better, everytime it starts to they say something to bring it back down. Why did none of them say anything we we were really falling in 2007/08. Because that is what for some reason they wanted to happen and why when it starts to look better one of them open that pie hole again to bring it back down.

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