U.S. stocks fell the most in a month, the euro weakened and commodities dropped after Spain said the recession will extend into next year and Chinese leaders pledged to clamp down on property speculation.
The Standard & Poor’s 500 Index (SPX) retreated 1 percent to 1,362.66 at 4 p.m. in New York, the biggest loss since June 25. The euro sank to the lowest level against the yen since November 2000. The yield on 10-year Treasuries fell five basis points to 1.46 percent. The S&P GSCI gauge of commodities slid 0.5 percent and oil in New York declined 1.3 percent. The additional yield investors demand for Spanish debt instead of German bunds reached a record.
“The problem hasn’t gone away and the unnerving part is that it’s deepening,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private- banking unit of KeyCorp in Cleveland. “The Spanish ghost is rising again. It’s not only the banks. The regional governments also need help. We need global economic improvement before we see a vibrant rally in the market. Things are not better yet.”
The Spanish region of Valencia prepared to seek a rescue from the central government and European finance ministers approved the bailout of the nation’s banks. Spain’s gross domestic product will fall 0.5 percent in 2013 instead of rising 0.2 percent as the government predicted April 27, Budget Minister Cristobal Montoro said today in Madrid.
The nation’s 10-year bonds fell for a seventh day, sending yields up 26 basis points to 7.27 percent. Yields on Spanish five-year notes climbed to a euro-era record high.
China won’t relax property control policies and will instead seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices, Xinhua News Agency said. Commodities retreated for the first time in eight days. Copper declined 2.7 percent to $3.44 a pound on the Comex in New York. Oil was down to $91.44 a barrel. Corn rose 2.2 percent to $7.95 a bushel.
The S&P 500 rose 0.4 percent this week. Google Inc. rallied 3 percent after the owner of the world’s most popular search engine said revenue surged 35 percent. Xerox Corp. sank 6.8 percent. The provider of printers and business services cut its full-year profit forecast as the economic slump in Europe crimped demand for technology.
General Electric Co., the world’s biggest maker of jet engines, power generation equipment and health-care imaging devices, reported earnings that topped analysts’ estimates. Profits at U.S. companies exceeded analyst forecasts at 73 percent of the 118 S&P 500 companies that have reported quarterly results so far, according to data compiled by Bloomberg.
The Stoxx Europe 600 Index (SXXP) lost 1.4 percent, trimming a seventh weekly advance. The decline in the gauge pared this week’s advance to 0.8 percent. Vodafone Group Plc (VOD), Europe’s largest mobile-phone company, slid 1.7 percent after posting quarterly service revenue that trailed analysts’ estimates.
“The market is more concerned about Spain going down the same route as Greece, looking for a sovereign bailout,” Dean Popplewell, an analyst in Toronto at the online currency-trading firm Oanda Corp., said in a telephone interview. “It doesn’t paint a rosy picture for capital markets.”
The euro dropped as much as 1.2 percent to 95.38 yen and weakened 1 percent to $1.216. The yield spread between 10-year Spanish and German securities widened to 611 basis points. Spain’s credit-default swaps rose to the highest in a month, climbing 17 basis points to 597, according to prices compiled by Bloomberg.
Euro-area finance ministers today approved a bank bailout for Spain of as much as 100 billion euros. The decision paves the way for a first payment from Europe’s temporary rescue fund, the European Financial Stability Facility.
The rate at which European banks say they see each other lending in euros for three months dropped below the equivalent London interbank offered rate for dollars for the first time since January 2008.
The euro interbank offered rate, or Euribor, for such loans was 0.451 percent today, according to data from the European Banking Federation. Three-month dollar Libor was at 0.4521 percent, data from the British Bankers’ Association showed.
Five-year note yields touched 0.5764, below the previous record of 0.577 percent set on July 16. Reports yesterday showed U.S. initial jobless claims were higher than estimated and measures of manufacturing activity and sales of existing homes missed estimates.
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