Stocks, Commodities, Euro Drop on Economic Growth Concern

Stocks and commodities dropped while Treasuries rose for a third day after European and Chinese manufacturing contracted and FedEx (FDX) Corp. predicted slower growth, undermining confidence in the global economy.

The Standard & Poor’s 500 Index slipped 0.7 percent, the most in two weeks, to 1,392.78 at 4 p.m. in New York and the Stoxx Europe 600 Index (SXXP) fell for a fourth straight day, tumbling 1.2 percent. The euro depreciated 0.2 percent to $1.3188. Ten- year Treasury yields declined two basis points to 2.28 percent and the rate on the German bund decreased seven basis points to 1.91 percent. Copper and oil sank at least 1.8 percent and nickel slid to the lowest price this year.

A gauge of European manufacturing fell to 47.7 as factory output unexpectedly shrank in Germany and France, according to London-based Markit Economics. A preliminary measure of Chinese manufacturing slipped to 48.1 in March, the lowest level in four months, based on figures from HSBC Holdings Plc and Markit Economics. FedEx, operator of the world’s largest cargo airline, predicted “below-trend” growth in coming quarters.

“Most people recognize that China growth has slowed,” said Mark Bronzo, who helps manage about $125 billion at Guggenheim Investments, in Irvington, New York. “It’s a question of: is it going to be a sharp or a mild slowdown? The data in Europe shouldn’t be a big surprise to anyone. Yet there’s enough of a reason there after the sharp run-up in stocks for the market to pull back or go sideways in the short term.”

Three-Day Drop

The S&P 500, which reached the highest level since May 2008 on March 19, retreated for a third day as concern about global growth overshadowed a drop in jobless claims to a four-year low and better-than-forecast growth in an index of leading economic indicators. Initial applications for unemployment benefits decreased by 5,000 to 348,000 in the week ended March 17, the fewest since February 2008, Labor Department figures showed today. The median forecast of 46 economists in a Bloomberg News survey projected 350,000.

The Conference Board’s gauge of the outlook for the next three to six months increased 0.7 percent after a revised 0.2 percent gain in January that was less than initially reported, the New York-based group said today. The median forecast of economists surveyed by Bloomberg News called for a 0.6 percent rise.

Commodity, industrial and financial companies helped lead losses among the 10 main groups in the S&P 500 today. FedEx tumbled after the low end of its profit forecast for the current fiscal quarter trailed analysts’ estimates amid slowing express- shipment demand. Chevron Corp. (CVX), Caterpillar Inc. (CAT) and Alcoa Inc. (AA) were among the biggest declines in the Dow Jones Industrial Average. (INDU)

First-Quarter Rally

The S&P 500 has rallied 11 percent so far this year, poised for its best first quarter since 1998, amid growing optimism in the world’s largest economy. The MSCI All-Country World Index has also climbed 11 percent in 2012.

Global equities may have a “correction” of between 5 percent and 9 percent after the first quarter as investors sell holdings to lock in profit from recent rallies, according to Jefferies Group Inc.

Sean Darby, chief global equity strategist at New York- based Jefferies, said in a Bloomberg Television interview from Hong Kong today that Europe’s debt crisis is still “not over” because of high borrowing costs in Spain and Portugal,

The Stoxx 600 declined to the lowest level since March 12 as mining and construction companies led losses. Randgold Resources Ltd. (RRS), which operates three mines in Mali, plunged 13 percent as an army officer said the West African country’s government has been overthrown. Baloise Holding AG sank 6.6 percent as Switzerland’s third-largest insurer said profit dropped 86 percent last year.

Yields Retreat

Yields on 10-year and 30-year Treasuries retreated for a third straight day after reaching the highest levels in more than four months on March 19. The 30-year bond rate decreased two basis points to 3.37 percent.

The euro fell for a third day versus the dollar. The yen gained against all 16 of its major peers, advancing 1.3 percent versus the euro and 2 percent against Australia’s currency. Japan’s exports unexpectedly exceeded imports by 32.9 billion yen ($395 million) in February, the government said. The Dollar Index rose less than 0.1 percent.

The S&P GSCI gauge of commodities declined 1.1 percent as coffee, natural gas and cocoa fell more than 3 percent to pace declines in 16 of 24 raw materials.

The MSCI Emerging Markets Index fell 0.7 percent, heading for its sixth straight decline. The Micex Index slid 1.4 percent in Moscow and the FTSE/JSE Africa All Shares Index retreated 1 percent in Johannesburg. The BSE India Sensitive Index fell 2.3 percent. The Hang Seng China Enterprises Index lost 0.1 percent, its seventh straight drop and its longest losing streak since June.

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

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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