Stocks, Euro, Commodities Sink on Concern Over Europe's Future
Nov. 9 (Bloomberg) -- U.S. stocks sank after a report that German lawmakers want to make it possible for European nations to stop using the region's shared currency as a surge in Italian bond yields intensified the credit crisis. The euro slid to a one-month low and Treasuries rallied.
The Standard & Poor's 500 Index lost 3.6 percent at 2:34 p.m. in New York, its worst drop since Sept. 22. The Stoxx Europe 600 Index slid 1.7 percent. The yield on Italy's five- year note jumped 70 basis points to 7.57 percent. The euro fell as low as $1.3526, the weakest since Oct. 10. The yield on 10- year Treasuries sank 12 basis points to 1.96 percent. Copper futures slipped 3.4 percent as the S&P GSCI Index of commodities slumped 1.2 percent.
Equities extended losses after Handelsblatt reported that German Chancellor Angela Merkel's party wants to make it possible for nations to exit the euro area without losing membership in the European Union, spurring concern the monetary union may fall apart. Earlier losses came after LCH Clearnet SA, a clearing house that guarantees investors' trades are completed, demanded larger deposits to back trades of Italian bonds and Silvio Berlusconi's offer to resign as prime minister triggered questions about who will lead Italy out of its crisis.
"The contagion effect is no longer a risk, it's a fact in Europe," Stephen Wood, who helps oversee about $163 billion as the New York-based chief market strategist for Russell Investments, said in a telephone interview. "Today's news is Italy. The question is -- is it too big to fail, too big to bail?" he said. "If anyone exits the euro, that will be a game changer."
Rebound Halted
The S&P 500 halted a two-day rebound from its first weekly loss since September. Berlusconi's offer to quit after austerity measures are passed triggered an afternoon rally yesterday that sent the index up 1.2 percent on optimism a new Italian leader would be more successful in taming the debt crisis.
Citigroup Inc., Regions Financial Corp. and Bank of New York Mellon Corp. lost more than 6.8 percent to lead declines in all 24 stocks in the KBW Bank Index, which slid 5.4 percent. While the index of lenders is down 26 percent in 2011, it has trimmed its slump from 36 percent as of Oct. 3.
General Motors Co. fell 9.7 percent after rescinding its target for break-even results in Europe, a region where it hasn't turned an annual profit in more than a decade. Adobe Systems Inc. tumbled 8 percent after the largest maker of graphic-design software cut its earnings forecast.
Almost 10 shares fell for each that rose in the Stoxx 600 and all 19 industry groups retreated. European markets closed before the Handelsblatt report.
Admiral Group Plc plunged 26 percent, the most since its initial public offering in 2004, as the U.K. car insurer said a period of higher-than-expected personal injury claims would lower reserves. Mediaset SpA, the broadcaster controlled by Berlusconi, fell 12 percent.
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net Michael P. Regan in New York at mregan12@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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