European stocks fell the most in two months and the euro weakened as Spain’s 10-year yields rose above 6 percent, spurring concern the debt crisis is worsening. Oil retreated for a third day, while Treasuries extended the longest rally since 2008.
The Stoxx Europe 600 Index (SXXP) lost 1.6 percent at 8:40 a.m. in New York. Futures on the Standard & Poor’s 500 Index slipped 0.3 percent after the gauge sank the most in three months yesterday. The euro fell 0.4 percent to $1.2848 and Spain’s 10-year yields jumped as much as 30 basis points to 6.04 percent. U.S. Treasuries rose for an eighth day, the longest run of gains since December 2008. Oil retreated 1.3 percent and copper slid 1.6 percent.
Germany, the Netherlands and Finland said late yesterday Spain should bear the cost of problems in their banks, with the European Stability Mechanism assuming only a limited burden in recapitalizations. The Bank of Spain said the economy kept falling at a “significant pace” in the third quarter and reports showed French consumer confidence dropped for a third month in September and Italian retail sales declined in July. Federal Reserve Bank of Philadelphia President Charles Plosser said yesterday more bond purchases probably won’t boost growth.
Asian markets also fell sharply. Japan’s Nikkei Stock Average slid 2%. Investors grew anxious over the territorial dispute with China after reports surfaced Tuesday that China rejected Japan’s invitation to talk at this week’s United Nations General Assembly. China’s Shanghai Composite Index shed 1.2% to close at the lowest level seen since January 2009.
Front-month crude oil futures dropped 1.3% to $90.22 a barrel on the back of euro-zone concerns, while October gold futures gained 0.2% to $1,766.60 an ounce. The dollar rose against the euro, but lost ground against the yen.
In corporate news, shares of Yahoo gained in premarket trading after the Internet company named Ken Goldman as its chief financial officer, effective Oct. 22, succeeding Tim Morse, who will leave the company in the fall. Mr. Goldman was previously the CFO of Fortinet.
RadioShack fell after the consumer electronics retailer said it chief executive officer, James Gooch, will leave the company, effective immediately.
Omnova Solutions slid after the building-materials maker reported fiscal third-quarter earnings that fell short of expectations and said it expected paper chemical volumes to decline given weak demand and increased competition.
Biogen Idec gained. The company and Sweden’s Orphan Biovitrum announced positive trial results for a hemophilia treatment. Biogen now plans to submit a Biologics License Application to the Food and Drug Administration.
Jabil Circuit reported fiscal fourth-quarter earnings that missed expectations while revenue was slightly above forecasts. The electronics contract manufacturer also announced a $100 million stock buyback program. The stock was still inactive ahead of the open.
Spanish 10-year bond yields have risen above 6 per cent for the first time since early this month as fears mount over political turmoil in the eurozone’s fourth-largest economy and delays in its bank rescue plan.
The yield demanded by investors on Spanish sovereign 10-year debt jumped as much as 30 basis points to 6.04 per cent on Wednesday, the highest since the European Central Bank unveiled plans on September 6 for possible intervention in eurozone bond markets to remove risks of a eurozone break-up.
By early afternoon London time the composite yield of Spain’s 10-year bonds had eased slightly to 6.01 per cent, while the two-year yield was up 23bp on the day to 3.39 per cent.
The rise in Spanish borrowing costs follows escalating uncertainty over whether Madrid will accept the terms demanded by the ECB. Alan Wilde, head of fixed income at Baring Asset Management, said Mariano Rajoy, Spain’s prime minister, had signalled he was testing market reaction before deciding his next move. “It is inevitable that markets will want to test what happens if bond yields get back to 7 per cent.”
Google Inc. GOOG -0.03% bulls have another reason to cheer this week. The Internet search behemoth has jumped to fifth-biggest U.S. firm by market capitalization from 10th place, where stood as of July 14. According to Bespoke Investment Group, Google is hot on the heels of Wal-Mart Stores Inc. WMT -0.64% . Google’s market capitalization is $249 billion, while Wal-Mart’s is $251 billion, Bespoke said. No. 3 Microsoft Corp. has a market value of $257.39 billion. Apple Inc. AAPL -0.41% and Exxon Mobil Corp. XOM -0.15% hold the top two spots, with valuations of $644.59 billion and $424.25 billion, respectively.