Finance Helper

Stocks fell, pushing the MSCI World Index lower for a third day, and oil and industrial metals retreated on concern the global economic recovery is faltering.

The MSCI World Index of 23 developed countries slipped 0.8 percent at 10:15 a.m. in London, extending its decline since reaching a high for the year on June 2 to more than 6 percent. Germany’s DAX Index retreated, bringing its drop from its 2009 high to 10 percent, the common definition of a correction. Nickel decreased for a third day on the London Metal Exchange, while oil slumped to its lowest level in five weeks. The yen rose against all 16 most-traded currencies tracked by Bloomberg.

Stocks tumbled, with Standard & Poor’s 500 Index futures declining by 0.9 percent, before the U.S. earnings season begins with Alcoa Inc.’s results on July 8. Profits at S&P 500 companies dropped last quarter and will also contract in the three months ending in September, extending the stretch of declines to a record nine quarters, according to analysts’ estimates compiled by Bloomberg. The Institute for Supply Management’s index today may show U.S. service industries contracted for a ninth straight month in June.

“The reassessment of the global economic outlook is likely to continue this week,” a team of Citigroup Inc. strategists, including Todd Elmer in New York, wrote in a research report today. “As a result, an extension of the recent bout of risk aversion may lie in store.” 

Volkswagen, Porsche

The Dow Jones Stoxx 600 Index of European shares slid 1.6 percent, led by commodity producers and automakers. Germany’s DAX slipped as much as 2.1 percent as Volkswagen AG retreated 4.4 percent. Porsche SE decreased 2.8 percent after the carmaker was cut to “sell” from “neutral” by UBS AG, which cited growing debt and a likelihood that the company will sell its Volkswagen stake.

BHP Billiton Ltd., the world’s biggest mining company, lost 2.4 percent. Rio Tinto Group, the third-largest, decreased 2.8 percent as nickel slid 3.9 percent to $15,575 a metric ton on the LME, while copper for three-month delivery fell 2.5 percent to $4,855.25 a ton. Gold for immediate delivery slipped 0.8 percent to $926.64 an ounce.

Brent crude for August settlement fell 2.7 percent to $63.85 a barrel on London’s ICE Futures Europe exchange. Oil retreated on concern that a faltering economic recovery will curb fuel demand, and as the dollar strengthened against the euro, limiting investor appetite for commodities as a hedge against inflation.

Emerging Markets

Emerging-market stocks fell the most in nine days as benchmark equity indexes in India and Russia recorded the world’s steepest declines.

The Bombay Stock Exchange Sensitive Index tumbled 4.5 percent after Finance Minister Pranab Mukherjee said the nation’s fiscal deficit may grow to the widest since 1994, fueling concern that more government borrowing will drive up interest rates for companies and consumers.

Russia’s Micex Index sank 3.6 percent as falling commodity prices dragged down OAO Rosneft, the nation’s biggest oil producer, and OAO GMK Norilsk Nickel, the largest mining company. The MSCI Emerging Markets Index lost 1.3 percent for the steepest slide since June 23.

The yen gained as much as 1.4 percent against the euro as investors sought the Japanese currency as a refuge. The dollar dropped as much as 1 percent versus the yen after French Finance Minister Christine Lagarde said the global exchange-rate system should be improved, adding to growing calls for an alternative to the dollar as the world’s reserve currency.

Russia, India

Russian President Dmitry Medvedev said in an interview with Corriere della Sera published yesterday the dollar system is “flawed,” and Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said July 3 he is urging his nation to diversify its foreign holdings away from the U.S. currency. The comments come as leaders of the Group of Eight countries meet in Italy with counterparts from China and India.

The pound tumbled and gilt prices jumped to their highest level this month after the Sunday Times said yesterday the Bank of England may increase its program of asset purchases by 25 billion pounds ($40 billion) as the recovery in Europe’s second- largest economy shows signs of petering out.

Britain’s currency weakened as much as 1.4 percent against the dollar and 0.9 percent versus the euro. The yield on the 10- year gilt fell seven basis points to 3.65 percent.

‘Good Run’

“Sterling is coming under increasing pressure as the market focuses on this week’s MPC announcement and the potential expansion of the quantitative easing program,” Paul Day, chief market analyst at MIG Investments SA in Neuchatel, Switzerland, wrote in an e-mail today. “I continue to favor sterling to underperform after its recent good run.”

The cost of protecting European corporate bonds in the credit-default swap market rose to the highest in almost two weeks, according to JPMorgan Chase & Co. prices for Markit Group Ltd. indexes. Default swaps on the high-yield Markit iTraxx Crossover Index climbed 26 basis points to 760, the highest level since June 23, indicating a deterioration in perceptions of credit quality.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros ($14 million) of debt from default for five years is equivalent to 1,000 euros a year.

Source: Bloomberg.