Stocks slid, extending last week’s drop, and gold rose to the highest price since September as a surge in Italy’s 10-year bond yields to a euro-era record showed Europe’s debt crisis is intensifying.
The Standard & Poor’s 500 Index slipped 0.6 percent to 1,245.36 at 1:13 p.m. in New York and the Stoxx Europe 600 Index lost 0.6 percent after tumbling 1.8 percent earlier. Ten-year Italian bond yields climbed to 6.56 percent and reached 6.68 percent. Gold for December delivery added 1.8 percent to $1,787.50 an ounce. Ten-year U.S. Treasuries rose, sending yields down six basis points to 1.98 percent. The Swiss franc slid on a report the central bank may weaken the currency.
Italy’s parliament will vote tomorrow on the 2010 budget report as Prime Minister Silvio Berlusconi’s majority unravels. Greek Prime Minister George Papandreou agreed yesterday to step down, paving the way for the creation of a new government to get international aid. European finance chiefs will meet in Brussels today to work on a plan to raise the region’s bailout fund.
“The market appears to be in no-man’s land and at the mercy of Europe’s newsflow,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $44 billion, said in a telephone interview. “The Europeans are doing some heavy lifting. The leadership has a good understanding of what needs to be done and they’ve set a goal for themselves. They are now going through the sausage- making process of crafting a solution.”
Losses Extended
The S&P 500 extended last week’s 2.5 percent drop, its first weekly retreat since September. Industrial and financial companies led declines, with Caterpillar Inc., International Business Machines Corp. and American Express Co. pacing losses in the Dow Jones Industrial Average. Amgen Inc. rallied 4.4 percent after saying it will repurchase as much as $5 billion in stock. Jefferies Group Inc. rose 1.9 percent after saying it cut gross holdings in sovereign debt of Portugal, Italy, Ireland, Greece and Spain.
Among European stocks, insurance, industrial and real- estate companies led losses. Carrefour SA dropped 2.5 percent after Citigroup Inc. advised selling shares of the world’s second-biggest retailer. PostNL NV slid 7.4 percent as the biggest Dutch postal operator said profit decreased.
European stocks pared losses earlier after Giuliano Ferrara, editor of newspaper Il Foglio and a former Berlusconi spokesman, reported that the premier may step down within hours and push for early elections. Berlusconi denied he’s stepping down, Ansa said, citing comments from the premier.
Gold Rallies
Gold futures traded at the highest price since Sept. 22. The metal climbed 6.3 percent in October, rebounding from the bear market in the previous month that saw it drop more than 20 percent from the record $1,923.70 reached Sept. 6. In September, investors sold gold to cover losses during a rout in equity markets.
Bullion may rise to a record $1,950 by the end of the first quarter, according to the median estimate of eight of the 10 most accurate forecasters tracked by Bloomberg over the past two years. The metal has appreciated more than sixfold in its 11- year run of annual gains. Before today, gold climbed 24 percent this year.
“Gold is resuming its role as a safe-haven investment because of the problems in Europe,” Donald Selkin, the chief market strategist at National Securities Corp. in New York, said today in a telephone interview. “It has also found good support from physical purchase. We saw investors return at the $1,600 level.”
Gasoline, silver and energy products also rose, spurring a 0.5 percent advance in the S&P GSCI Index of commodities, even as 13 of the 24 materials tracked by the gauge retreated.
Oil Climbs
Oil climbed to a three-month high in New York, rising 0.7 percent to $94.87 a barrel.
Italy’s 10-year bond yield trimmed gains after climbing as much as 31 basis points. The extra yield investors demand to hold Italian 10-year bonds instead of German bunds, the euro region’s benchmark government securities, widened to as much as 491 basis points, or 4.91 percentage points, the most since the introduction of the euro in 1999, before retreating from the day’s high to 488 basis points.
Two Berlusconi allies defected to the opposition last week, and a third quit late yesterday. Six others called for Berlusconi to resign and seek a broader coalition in a letter to newspaper Corriere della Sera. More than a dozen more are ready to ditch the premier’s coalition, Repubblica daily reported yesterday, without citing anyone.
The yield on the 10-year Greek bond rose 88 basis points to 27.65 percent, climbing for the sixth straight day, while the two-year note yield touched a euro-era record. Papandreou and Antonis Samaras, head of the main opposition party, agreed to form a government to lead Greece “to elections immediately after the implementation of European Council decisions,” according to an e-mail from the office of President Karolos Papoulias in Athens.
German, French Bonds
The yield on the 10-year German bund decreased four basis points to 1.78 percent, while the French 10-year yield rose three basis points, driving the difference in yield between the two securities seven basis points higher to 130.
The euro weakened 0.5 percent versus the yen as it slipped against 10 of 16 major peers.
The Swiss franc fell against all 16 of its most-traded peers on a report that the nation’s central bank may move to weaken the currency.
The Swiss franc slid 1.6 percent versus the 17-nation euro and lost 2 percent versus the dollar. Policy makers remain ready to act in case the franc’s strength increases the risk of deflation and threatens the country’s economy, Swiss National Bank President Philipp Hildebrand told NZZ am Sonntag newspaper in an interview conducted Nov. 2 and published yesterday.
The MSCI Emerging Markets Index slipped 0.1 percent. The Shanghai Composite Index slipped 0.7 percent, and South Korea’s Kospi Index (KOSPI) decreased 0.5 percent. Markets in India, Turkey, Malaysia and the Philippines were closed for a holiday.
Debarati Roy and Rita Nazareth -Bloomberg Nov 7, 2011