Europe Stocks Fall With Euro on Spain Downgrade; Aussie Gains

Most European stocks fell, the euro weakened and German bonds advanced after Standard & Poor’s downgraded Spain’s debt rating. Australia’s dollar rose on better-than-expected jobs data.

The Stoxx Europe 600 Index (SPX) slid 0.1 percent as of 8:02 a.m. in London, while S&P 500 Index futures were little changed. The yield on German 10-year bunds dropped to a one-week low of 1.44 percent and Italian bonds fell before a debt auction. The euro weakened against all 16 major counterparts. The Dollar Index, a gauge of the currency against six major peers, touched a one- month high. Australia’s dollar advanced 0.3 percent versus the greenback and China’s yuan climbed to a 19-year high.

S&P cut Spain’s debt rating to one level above junk as the government considers a second bailout. Australian employers hired almost three times the number of workers economists forecast last month, while Japan’s machinery orders dropped more than economists forecast. Central banks in Brazil and South Korea cut interest rates while Bank Indonesia left rates unchanged, according to announcements yesterday and today.

“The global economy’s in a tough place,” Gary D. Cohn, Goldman Sachs Group Inc.’s president and chief operating officer, said in a Bloomberg Television interview from Tokyo. “If you look at what’s going in the euro zone, you look at what’s going on in the United States, you look at what’s going on in Japan and you even look into China today, you’ve got a lot of anxiety in the system.”

Spanish banks including Banco Santander SA and Bankia SA fell at least 1.7 percent following the S&P rating action. France’s Carrefour SA (CA) rose 4.8 percent after the world’s second- largest retailer posted third-quarter sales that beat analyst estimates.

Fanuc, Toyota

In Asia, the Nikkei 225 Stock Average declined 0.6 percent and the Shanghai Composite Index slid 0.8 percent. Japan’s machinery orders dropped 3.3 percent in August, compared with a median estimate for a 2.3 percent decline and a 4.6 percent gain in July, data showed today. Wholesale deliveries of passenger vehicles in China fell 0.3 percent last month, the China Association of Automobile Manufacturers said yesterday.

Fanuc Corp., the world’s largest maker of controls that run machine tools, sank 2.7 percent in Tokyo. Toyota Motor Corp. (7203) fell 1.4 percent after announcing a recall of about 7.43 million vehicles because of a faulty power-window switch. Asia’s biggest carmaker also fell as a territorial dispute led to a slump in deliveries of Japanese marques in China.

SAIC Motor Corp. led declines among automakers in China, dropping 3.3 percent. Lynas Corp. slumped 15 percent in Sydney after a court ruling further delayed the development of its rare-earth refinery in Malaysia.

‘Remains Difficult’

“The situation remains difficult,” said Angus Gluskie, who oversees more than $350 million at White Funds Management in Sydney. “Investors need to remain cautious, and it’s not a time to bet big. It’s worth keeping an eye on how the U.S. election is shaping up as well as how the European development is shaping up.”

The euro fell for a fourth day versus the dollar and the yen, slipping 0.2 percent and 0.4 percent, respectively. Spain’s deepening recession is limiting the government’s policy options and social discontent is likely to intensify, S&P said in a statement yesterday.

The Australian dollar reached $1.0287, its strongest level since Oct. 2. The statistics bureau said the number of people employed in Australia rose by 14,500 in September, compared with the median estimate for a 5,000 increase in a Bloomberg survey.

The yuan touched 6.2770 per dollar, the strongest since China unified official and market exchange rates at the end of 1993. That was 0.99 percent stronger than the central bank’s daily reference rate, near to the maximum permitted gap of 1 percent.

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Sara Eisen in New York at seisen2@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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