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Stocks Decline With Spain, Italy Bonds While Yen Weakens

By Stephen Kirkland and Lu Wang
February 11, 2013 4:24 PM EST 2 Comments
A financial trader uses a telephone as he monitors data on his computer screens at the Frankfurt Stock Exchange in Frankfurt.
Photographer: Ralph Orlowski/Bloomberg
A financial trader uses a telephone as he monitors data on his computer screens at the Frankfurt Stock Exchange in Frankfurt.

U.S. stocks slipped after a six-week rally left the Standard & Poor’s 500 Index trading at its most- expensive valuation since July 2011. European shares fell with Spanish and Italian bonds as the region’s finance ministers prepared to meet to discuss aid to Cyprus and Greece.

The S&P 500 lost 0.1 percent to 1,517.01 at 4 p.m. in New York after closing last week at its highest level since November 2007 and a price-to-earnings ratio of almost 15. The Stoxx Europe 600 Index dropped 0.6 percent. Italy’s 10-year bond yield rose seven basis points to 4.62 percent, approaching a two-month high. The yen weakened against all 16 major peers, falling 1.5 percent versus the euro. Copper and soybeans lost more than 1 percent to pace losses in commodities.

European finance chiefs were meeting in Brussels today as a tightening election contest in Italy and corruption allegations in Spain threaten to reignite the region’s debt crisis. Ministers and central bankers from the Group of 20 will gather in Moscow later this week. Haruhiko Kuroda, one of the potential candidates to head the Bank of Japan, said additional monetary easing can be justified this year.

“With the strong start this year, it’d be very understandable if stocks pause here to get a gauge of how growth is going to shape up through the middle part of the year,” James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, said in a telephone interview. His firm manages $759 billion.

Low Volume

Equity trading volume was lower than average, with markets in Japan, China, Hong Kong, South Korea, Taiwan, Vietnam, Singapore and Malaysia closed for public holidays.

The S&P 500 has rallied about 6.4 percent in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The index is about 3.2 percent below its record of 1,565.15 reached in 2007.

Commodity and consumer-discretionary companies led losses in seven of the 10 main industry groups in the S&P 500 today, while financial, technology and utility companies gained. UnitedHealth Group Inc., Home Depot Inc. and Boeing Co. lost at least 0.9 percent for the biggest declines in the Dow Jones Industrial Average, while Microsoft Corp. and Pfizer Inc. rose the most.

Google Inc. slipped 0.4 percent as Chairman Eric Schmidt adopted a plan to sell as many as 3.2 million shares in the operator of the world’s most popular search engine. Loews Corp. fell 0.8 percent after reporting earnings that missed estimates. AOL Inc. jumped 7.4 percent after analysts recommended investors buy the shares. Trading volume of stocks in the index was 27 percent less than the 30-day average at this time of day.

Sanofi Gains

About three stocks declined for every two that rose in the Stoxx 600, where trading volume was 29 percent less than the 30- day average. Novo Nordisk A/S plunged 13 percent, the most in almost four years, after failing to win U.S. approval for a new insulin. Sanofi, which produces the best-selling Lantus insulin, jumped 3.4 percent in Paris.

Lundin Petroleum AB tumbled 10 percent after saying resources in its part of the Johan Sverdrup oil discovery may be toward the low end of previous estimates. Royal Ahold NV advanced 3.8 percent in Amsterdam after agreeing to sell its 60 percent stake in ICA, Sweden’s largest food retailer, to Hakon Invest AB for 20 billion kronor ($3.1 billion).

Italy’s 10-year bond yield approached an eight-week high of 4.63 percent set on Feb. 8. The rate on similar-maturity Spanish debt climbed six basis points to 5.43 percent. U.S. Treasury 10- year yields rose one basis point to 1.96 percent.

Yen Weakens

The yen weakened 1.3 percent to 93.91 per dollar. The euro climbed 0.3 percent to $1.3400, snapping a three-day decline.

Some additional easing measures may be justified for 2013, Kuroda said in an interview in Tokyo today, stressing that he was speaking in his capacity as an economist and chief of the ADB, not as a BOJ contender.

The Group of Seven nations are considering releasing a statement on exchange rates this week to calm concern the world is on the brink of a currency war, three officials from G-7 countries said, before the G-20 meeting.

The S&P GSCI gauge slipped 0.1 percent as 18 of its 24 commodities declined. Soybeans fell after the U.S. Department of Agriculture raised its estimate of world inventories in a report on Feb. 8. Wheat slipped 2 percent and gasoline slumped 0.9 percent to $3.03 a gallon. New York-traded crude oil rallied 1.4 percent to $97.03 a barrel.

The MSCI Emerging Markets Index slipped 0.2 percent as price swings fell to an all-time low amid Lunar New Year holidays. Turkey’s benchmark index slumped 1.8 percent, while Indonesia’s Jakarta Composite Index rose 0.3 percent to a record.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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