Sept. 30 (Bloomberg) -- Stocks fell, dragging the MSCI All-Country World Index to its biggest quarterly loss since 2008, while the U.S. dollar strengthened as declines in Chinese manufacturing and German retail sales signaled global growth is slowing. Treasuries rose, and oil retreated.
The MSCI All-Country World Index slid 2.3 percent at 4 p.m. New York time, extending its decline since June 30 to 18 percent. The Standard & Poor’s 500 Index slumped 2.5 percent. The Stoxx Europe 600 Index fell 1.2 percent. The dollar gained against its 16 major peers, including a 1.3 percent advance versus the euro. Treasury 10-year notes snapped a five-day drop, extending their biggest quarterly increase since the depths of the financial crisis in 2008. Oil lost 3.6 percent.
Chinese manufacturing shrank a third month, the longest streak since 2009. German sales dropped the most in more than four years, while European inflation unexpectedly quickened to the fastest in almost three years. Japanese industrial production grew less than economists forecast. The S&P 500 pared losses earlier after the Institute for Supply Management-Chicago Inc.’s business barometer and Thomson Reuters/University of Michigan gauge of consumer confidence beat projections.
“The situation is quite dark,” said Philipp Musil, who helps manage about $11 billion at Semper Constantia Privatbank AG in Vienna. “We’re very cautious about equities. All in all the figures are not good and many investors think we’re going straight into a recession.”
Morgan Stanley slumped 10 percent. The owner of the world’s largest retail brokerage is being priced in the credit-default swaps market as less creditworthy than most U.S., U.K. and French banks and as risky as Italy’s biggest lenders. Goldman Sachs Group Inc. shares lost 5.4 percent. Deutsche Bank AG lost 4.9 percent as Handelsblatt reported that Germany’s biggest lender may lower its profit target.
The cost of insuring corporate debt surged in Europe with the Markit iTraxx Europe Index of credit-default swaps linked to 125 companies with investment-grade ratings up 11 basis points at 202, approaching the highest in 2 1/2 years.
Credit-default swaps insuring Chinese government bonds rose 21.5 basis points to 201.5, the highest level since March 2009, according to CMA.
The S&P 500 extended this quarter’s slide to 14 percent, the most since the last three months of 2008. Futures on the index maintained losses today after U.S. consumer spending increased 0.2 percent in August, matching the median economist projection in a Bloomberg survey. Growth slowed from the 0.7 percent increase in July.
“The U.S. economy is tipping into a new recession,” Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, said today during a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “You have wildfire among the leading indicators across the board. Non-financial services plunging, manufacturing plunging, exports plunging. That is such a deadly combination.”
U.S. stocks fell even after business activity in the U.S. accelerated in September. The Institute for Supply Management-Chicago said its business barometer rose to 60.4 this month from 56.5 in August. Economists forecast the gauge would drop to 55, according to the median estimate in a Bloomberg News survey.
Another report showed confidence among U.S. consumers rose in September from the lowest level since November 2008 as pessimism about the economy eased. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 59.4 this month. The median estimate of economists surveyed by Bloomberg News was 57.8.
The yen climbed 1.1 percent against the euro. The Dollar Index, which tracks the U.S. currency against those of six trading partners, gained 0.5 percent. The Japanese and U.S. currencies are the best performers this quarter among the 10 tracked by Bloomberg Correlation-Weighted Currency Indexes, gaining about 12 percent and 6.7 percent, respectively.
Japan’s factory output increased 0.8 percent in August from July, the trade ministry said in Tokyo today, missing the 1.5 percent median estimate of 28 economists surveyed by Bloomberg News. South Korean industrial production rose 4.8 percent from a year earlier, trailing the median 6.1 percent gain forecast in a separate Bloomberg survey.
Treasury 10-year yields fell nine basis points to 1.90 percent. The yield on the German 10-year bund declined 12 basis points to 1.89 percent.
Oil fell 3.6 percent to $79.20 a barrel in New York.
The MSCI Emerging Markets Index dropped 1.9 percent, heading for the biggest monthly retreat since October 2008. China’s Shanghai Composite Index slipped 0.3 percent to the lowest level since April 2009, while Russia’s Micex Index sank 2.9 percent.
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