Nov. 24 (Bloomberg) -- Stocks fell, Italian bonds declined and the cost of insuring European government debt against default rose to a record after German Chancellor Angela Merkel ruled out joint euro-area borrowing.
The MSCI All-Country World Index retreated 0.3 percent at 2:21 p.m. in New York. The yield on Italy's 10-year bonds climbed above 7.1 percent. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose three basis points to 381. The Stoxx Europe 600 Index fell 0.2 percent and Standard & Poor's 500 Index futures slid 1.4 percent. U.S. markets are closed today for Thanksgiving. The euro was little changed against the dollar at $1.3338.
Euro bonds are "not needed and not appropriate," Merkel said at a press conference with Italian Prime Minister Mario Monti and French President Nicolas Sarkozy in Strasbourg, France. More than $4 trillion has been erased from the value of equities worldwide this month as rising borrowing costs in the euro-area stoked concern the debt crisis will derail growth.
"The market sees a 'no' and reacts to it," said Martin Huefner, chief economist at Assenagon GmbH in Munich, which manages more than $4.7 billion of client assets. "We're going to see a deterioration of equity markets in the coming months to the point where something will have to be done. The market would be euphoric to get euro bonds. Apparently the pressure is not big enough yet."
The euro weakened 0.3 percent against the yen and 0.1 percent versus the Swiss franc. The yen advanced against all but two of its 16 major counterparts.
Portugal Downgrade
The yield on Italy's 10-year bond climbed 14 basis points to 7.11 percent, while similar-maturity French debt yields rose three basis points to 3.72 percent.
Portugal's bonds fell, with 10-year note yields climbing 90 basis points to 12.21 percent after Fitch Ratings cut the nation's credit grade one step to BB+, the highest junk status.
Germany's 10-year bond yield rose as much as 12 basis points to 2.26 percent before trading five basis points higher at 2.20 percent. Two-year note yields increased three basis points to 0.47 percent.
The Munich-based Ifo institute's German business climate index, based on a survey of 7,000 executives, increased to 106.6 from 106.4 in October. Economists expected a decline to 105.2, according to the median of 40 forecasts compiled by Bloomberg.
Three shares advanced for every two that fell in the Stoxx 600 even as the benchmark gauge closed at the lowest level since Oct. 4. Oil and health-care stocks led declines while basic- resources and automakers advanced.
Beating Estimates
Raiffeisen Bank International AG gained 5.9 percent after eastern Europe's third-biggest lender reported profit that topped analyst estimates. Dixons Retail Plc jumped the most since May, advancing 7.1 percent after the U.K.'s largest electronics retailer reported a smaller first-half loss than analysts had predicted.
The Nikkei 225 Stock Average sank 1.8 percent after S&P signaled it may be getting closer to lowering Japan's sovereign credit rating. Japanese Prime Minister Yoshihiko Noda's administration hasn't made progress in tackling the public debt burden, S&P said.
Canadian stocks fell, with the benchmark index retreating 0.6 percent, on track to the lowest close in seven weeks. Volume was 77 percent below its average for the time of day over the past 180 days due to the U.S. market holiday.
The MSCI Emerging Markets Index added 0.3 percent and Brazil's Bovespa gauge advanced 0.7 percent while Russia's Micex Index lost 0.8 percent. Banks led Turkey's ISE National 100 Index down 2.9 percent after Merkel's comments. The Hang Seng China Enterprises Index climbed 1 percent in Hong Kong after the Chinese central bank lowered reserve-ratio requirements for some rural lenders. India's Sensex rose 1 percent.
--With assistance from Shiyin Chen in Singapore, Julie Cruz in Frankfurt, Emma Charlton, Will Hadfield, Adam Haigh and Michael Shanahan in London and Marie-France Han in New York. Editors: Marie-France Han, Brendan Walsh
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
Thursday, November 24, 2011
Stocks Fall, Credit Risk Rises to Record on Merkel Bond Comments
Oil Rises From 2-Week Low on U.S. Supply, German Business Data - Bloomberg
Oil climbed from the lowest price in two weeks after a surprise drop in U.S. stockpiles, and as an unexpected advance in German business confidence countered concern that Europe’s debt crisis will trigger a recession.
New York futures gained as much as 1.1 percent. Crude inventories declined last week to the lowest since January 2010, according to an Energy Department report yesterday. German business confidence unexpectedly rose for the first time in five months in November. The official Saudi Press Agency reported that four people were killed and nine wounded in violence in the kingdom’s eastern province.
“Oil is holding the banner high with strong demand for heating oil as we move into the winter combined with the lack of sweet crude from Libya,” said Thorbjorn Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark, who forecasts Brent will average $107 a barrel this quarter.
Crude for January delivery rose as much as $1.14 to $97.31 a barrel in electronic trading on the New York Mercantile Exchange. It finished the session at $97.03. Prices have gained 6.2 percent this year.
Floor trading on Nymex is closed today for the U.S. Thanksgiving holiday. Electronic transactions will be booked with tomorrow’s trades for settlement purposes.
Brent oil for January settlement on the London-based ICE Futures Europe exchange settled at $107.78 a barrel, up 76 cents. The European benchmark crude was at a premium of $10.73 to New York-traded West Texas contracts. The spread reached a record $27.88 on Oct. 14.
German Business Climate
Oil closed at the lowest price since Nov. 9 yesterday after Germany failed to find buyers for 35 percent of bonds at an auction. Today’s business climate index from the Munich-based Ifo institute, based on a survey of 7,000 executives, rose to 106.6 from 106.4 in October. Economists in a Bloomberg News survey expected a decline to 105.2.
U.S. crude stockpiles fell 6.22 million barrels in the week ended Nov. 18 to 330.8 million barrels, according to yesterday’s Energy Department report, the biggest drop in nine weeks. Supplies were expected to climb 500,000 barrels, based on the median estimate of 13 analysts surveyed by Bloomberg News.
“The decrease in inventory is going to be a supportive factor to keep crude oil from losing too much ground,” said Ken Hasegawa, a commodity-derivatives trading manager at Newedge Group in Tokyo. “One hundred dollars is not far from now but I really doubt it will exceed the recent high of around $103.”
Distillate-fuel stockpiles declined 770,000 barrels to 133 million, the lowest since December 2008, the report showed. Stockpiles were down for an eighth week. Gasoline inventories surged 4.48 million barrels, the most since January.
Goldman Sachs Group Inc. yesterday raised its forecast for West Texas crude to $102 a barrel for the first quarter. The bank cited a Nov. 14 announcement by Enbridge Inc. that it would reverse the Seaway pipeline to boost the flow of oil from Cushing to the Gulf of Mexico. The storage hub in Oklahoma is the delivery point for New York-traded crude futures.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
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Oil Prices to Remain Choppy
By SARAH KENT
LONDON—The sharp price swings seen in the oil market this year are likely here to stay, as the market remains torn between a weakening global economy and heightening risks to an already tight oil supply.
The push and pull of these two competing themes is expected to keep oil prices volatile in the coming months, causing pain to oil traders unable to stay on top of the market fluctuations.
In a sign of just how confusing the current picture is, revisions to major banks' oil-price forecasts—used by traders as useful market barometers—have become common place in recent weeks. But banks are by no means in agreement on which direction the market will go.
On Tuesday, French bank Société Générale raised its price forecast for European benchmark Brent crude by $10 to $110 a barrel, citing the tight global oil supply picture. But that was followed the next day by a forecast from JP Morgan, which trimmed its Brent forecast for the beginning of 2012 to $105 a barrel, from $115 a barrel previously. The U.S. bank said "the headwind of economic and financial market risks is turning into a gale."
In light holiday trading Thursday, the front-month January Brent contract on London's ICE futures exchange was 65 cents higher at $107.67 a barrel. The front-month January contract on the New York Mercantile Exchange was trading 42 cents higher at $96.58 per barrel.
Physical oil inventories have dwindled in recent months following the Libya supply disruption and other factors. But the dismal global economic picture poses a significant threat to oil demand, with concerns over the state of the economy causing Brent to sink around 6% over the last two weeks.
"People are reassessing their economic expectations. There's far too much uncertainty in the euro zone and that at the moment really is the key factor we cannot determine for next year," said Andrey Kryuchenkov, vice president of commodities research at VTB Capital. "Given that macro risks are still there ... volatility is here to stay."
But countering the current economic uncertainty and boosting oil prices are continuing geopolitical tensions with the potential to severely disrupt oil supply.
Iran has been the key focus in recent days, after the U.S., the U.K and Canada imposed fresh sanctions on the country Monday. But a resurgence of protests in Egypt as well as ongoing problems in Syria and Yemen also pose potential threats to the crude markets.
The risks presented by the current unrest in the Middle East and North Africa are heightened as they follow on from a year in which supply was already interrupted, leading to a drain on crude stockpiles, analysts said.
The loss of some 1.3 million barrels a day in Libyan crude exports for much of the year put a big dent in global oil supply, while production problems in the North Sea, and disruptions due to sabotage and civil unrest in Nigeria, Yemen and Syria further depleted supply.
According to the most recent data from the International Energy Agency, oil inventories in Europe in September were at their lowest level since November 2007, while preliminary data from October show further stock draws.
"Volatility is going to be there right through next year," said Amrita Sen, oil -market analyst at Barclays Capital. "Supply buffers are very thin and in a market like that, there is much higher volatility."
Write to Sarah Kent at sarah.kent@dowjones.com