Stock market plunge worldwide

Stocks dive amid Euro political concern

Stocks plunged worldwide and the euro weakened as Europe's backlash against budget cuts gained momentum, while commodities retreated as manufacturing shrank

SMH,

24 April, 2012

The Standard & Poor's 500 Index dropped 1.2 per cent at 2:11 p.m. New York time. The Stoxx Europe 600 Index sank 2.3 per cent to a three-month low as gauges for eight nations, including Sweden, Germany, France and the Netherlands lost at least 2.5 per cent. The euro decreased 0.6 per cent versus the dollar and 1.2 per cent against the yen. The cost of insuring against a European sovereign default climbed to the highest level in four weeks. The S&P GSCI Index of 24 raw materials slumped 0.4 per cent. US Treasuries rose a fourth day.

Dutch Prime Minister Mark Rutte offered his cabinet's resignation amid a revolt against spending cuts. French President Nicolas Sarkozy lost the first round of his re- election bid as the anti-euro National Front won a record share of the vote. Euro-area services and manufacturing contracted more than estimated, while data indicated China's production will shrink for a sixth month.

"There's enough out there that can justify taking the market down," Mark Bronzo, who helps manage about $US125 billion at Guggenheim Investments in Irvington, New York, said in a telephone interview. "There's more work to be done in Europe, yet there's political and social pressure not to do more. The economic news was disappointing. In addition, we're digesting a big advance in the market."

Stocks fell after the S&P 500 rose 0.6 per cent between April 13 and April 20, ending a two-week losing streak. The benchmark measure of US shares had rallied 25 per cent since Oct. 3. The Stoxx Europe 600 advanced 1.7 per cent last week, rising for the first time in five weeks.

German Bonds

The yield on Germany's five-year bond fell to a euro-era low of 0.60 per cent. The cost of credit-default swaps on Dutch government debt climbed 11.5 basis points to 130, the highest in five months, as opposition to austerity in the traditionally budget-conscious nation propelled Rutte's coalition toward an early breakup.

France's CAC 40 stock index slumped 2.8 per cent after Sarkozy trailed Francois Hollande in the first round of his re- election attempt, while Marine le Pen's National Front won 20 per cent of the vote.

"Politics will undoubtedly provide the pepper in this week's financial melting pot," said Bill Blain, co-head of the special situations group at Newedge Group Ltd. in London. "A turnover in the Dutch government, and the inevitable swing toward more skeptical anti-Europe politics could well generate increased uncertainty."

Less Manufacturing

Euro-area services and manufacturing declined, according to a Market Economics index that fell to a five-month low of 47.4. Economists in a Bloomberg survey projected an increase to 49.3, the median forecast. HSBC Holdings and Markit reported a preliminary reading of 49.1 for their China purchasing managers' index, compared with a final 48.3 in March. Readings of less than 50 indicate contraction in both reports.

The Stoxx Europe 600 Index dropped the most since April 10 as all 19 industries retreated. ING Groep NV, the largest Dutch financial-services company, and The Hague-based Aegon NV sank more than 6 per cent. Rio Tinto Group and BHP Billiton Ltd. led mining shares lower, falling at least 3.6 per cent.

Netherlands, Sweden

Royal Philips Electronics NV was the only company in the AEX index of Dutch stocks to advance after the world's biggest light-bulb maker reported profit that beat analysts' estimates. Sweden's OMX Stockholm 30 Index plunged 4.6 per cent, the most among developed-market gauges worldwide, driven lower by declines exceeding 4.5 per cent in Hennes & Mauritz AB and Nordea Bank AB.

The Dollar Index gained 0.3 per cent as the euro weakened. Treasuries gained, driving yields on 10-year notes down four basis points to 1.92 per cent. The yield on the 30-year bond dropped to the lowest in almost seven weeks before the Federal Open Market Committee begins a two-day meeting tomorrow to set monetary policy.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed three basis points to 278. The cost of insuring French government debt rose to the highest in more than three months with credit-default swaps linked to the nation's debt adding five basis points to 204.5.

Copper futures lost 2 per cent to settle at $US3.634 a pound on the Comex in New York. Hedge funds cut their bets on higher commodity prices by the most in four months on mounting concern that Europe's debt crisis will derail global growth. Money managers lowered net-long positions across 18 US futures and options by 11 per cent to 898,022 contracts in the week ended April 17, the most since Dec. 20, data from the Commodity Futures Trading Commission show.

Oil, Gold

Oil dropped 1.1 per cent in New York, slipping from the highest closing price in three days, after Chinese customs data showed the country's apparent oil demand dropped to the lowest level since October.

Gold futures retreated 0.5 per cent.

The Shanghai Composite Index slid 0.8 per cent and the Hang Seng China Enterprises Index dropped 2.2 per cent. The MSCI Asia Pacific Index lost 0.5 per cent for a third day of losses. The Nikkei 225 Stock Average slipped 0.2 per cent.