European Stocks Drop for Third Consecutive Day; Yen, Gold Weaken
European stocks fell for a third day on concern that U.S. lawmakers won’t agree on a budget before year-end holidays. The yen weakened to the lowest since April 2011 after the Liberal Democratic Party returned to power on calls for more monetary easing, and gold declined.
The Stoxx Europe 600 Index retreated 0.4 percent at 10:35 a.m. in London. Standard & Poor’s 500 Index futures rose 0.1 percent. The yen weakened to a 20-month low against the dollar and gold for immediate delivery dropped 0.3 percent. The yield on Germany’s 10-year bond increased two basis points to 1.37 percent. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 0.1 percent.
“Time is running out to avoid a temporary fall off the U.S. fiscal cliff,” Kit Juckes, the head of foreign-exchange research at Societe Generale SA in London, wrote in a report.
The Congressional Budget Office says the U.S. will probably tumble back into a recession should lawmakers fail to reach an accord on the more than $600 billion in automatic tax increases and spending cuts scheduled to start Jan. 1. Three years after surrendering half a century of control, Japan’s LDP reclaimed power in a landslide election victory yesterday, calling for more government spending and central bank stimulus.
Telecommunications companies posted the biggest decline of the 19 industries in the Stoxx 600. (SXXP) Royal KPN NV tumbled 14 percent, its biggest plunge in 11 years. The phone operator scrapped its final dividend for 2012 after winning a spectrum auction in the Netherlands.
The Stoxx 600, Europe’s benchmark gauge, advanced more than 13 percent this year, set for the first annual gain since 2010, amid increased confidence that policy makers are gaining control over the region’s debt crisis. The S&P 500 and the MSCI Asia Pacific Index have each risen about 12 percent in 2012.
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