By David Merritt Nov. 17 (Bloomberg) -- Stocks declined and the yen rose after Federal Reserve Chairman Ben S. Bernanke said “significant” challenges remain for the U.S. economy, the world’s biggest. The MSCI World Index dropped 0.5 percent at 12:22 p.m. in London. The yen strengthened against 13 of the 16 most traded currencies tracked by Bloomberg. The Dollar Index, which gauges the currency against major trading partners and is down 7.4 percent this year, gained 0.5 percent. Gold retreated from a record. “Our concern is that the underlying growth rate in this recovery is going to be much more muted than any other recovery we’ve seen in the past 50 years,” said Richard Batty, the global investment strategist at Standard Life Investments in Edinburgh. “That’s why we stick to assets like government bonds. We are not willing to chase riskier assets.” The U.S. economic recovery will be restrained by the “headwinds” of reduced bank lending and a weak labor market, and “future setbacks are possible,” Bernanke said in a speech to the Economic Club of New York yesterday. Bank of England policy maker Andrew Sentance told Bloomberg Television late yesterday that it’s not yet time to consider reining in emergency stimulus measures. UBS Gains Europe’s Dow Jones Stoxx 600 Index slid 0.3 percent after reaching a 13-month high yesterday. Declines were limited after UBS AG advanced 0.3 percent in Zurich. Switzerland’s largest bank said it aims to reach 15 billion Swiss francs ($14.9 billion) in annual pretax profit in the next three to five years. The MSCI Asia Pacific Index dropped 0.4 percent. Kuwaiti shares tumbled after the U.S. Department of Justice said yesterday that Agility, the Middle East’s biggest storage and logistics company, was indicted by a federal grand jury on charges of conspiracy to defraud. The Kuwait Stock Exchange Index dropped 2.9 percent to the lowest close since March, the second-biggest decline of 89 benchmarks tracked globally by Bloomberg. Agility lost 8.3 percent. U.S. stock-index futures declined, indicating that the Standard & Poor’s 500 Index may retreat from a 13-month high. A report from the Fed due at 9:15 a.m. in Washington may show industrial production rose 0.4 percent following an increase of 0.7 percent in September, according to the median forecast of 75 economists surveyed by Bloomberg News. A separate report from the Labor Department will show prices paid to producers rose 0.5 percent in October, reflecting higher food and fuel costs, according to the median estimate by economists. From a year earlier, producer prices probably fell 1.8 percent. CIT Loss CIT Group Inc., the bankrupt 101-year-old commercial lender, said its net loss widened more than threefold to $1.03 billion in the third quarter as bad loans rose. CIT filed for bankruptcy Nov. 1, blaming losses on subprime mortgages and tightening credit markets. The S&P 500 has surged 64 percent since March 9 as the Fed held interest rates near zero percent and lent, spent or guaranteed $11.6 trillion to combat more than $1.6 trillion in losses and writedowns at the world’s biggest financial firms and the first global recession since World War II. The yen rose, climbing 0.4 percent to 132.84 per euro. The Australian dollar fell from near the strongest level in 15 months after minutes from the central bank’s most recent meeting damped speculation that borrowing costs may increase a third time. The Aussie, as the currency is also called, dropped 1.1 percent to 92.63 U.S. cents. Pound Rises The pound climbed against the euro after a government report showed U.K. inflation rose more than economists forecast in October. Sterling gained 0.3 percent to 88.76 pence per euro, advancing against 10 of its 16 most actively traded peers. Copper for delivery in three months fell 0.8 percent to $6,793 a metric ton on the London Metal Exchange, retreating from its highest price for the year. Nickel, zinc and tin also declined. Gold for immediate delivery fell 0.8 percent to $1,129.93 an ounce in London, having reached a record $1,143.60 yesterday. Crude oil for December delivery dropped 0.9 percent to $78.22 a barrel in New York. To contact the reporter on this story: David Merritt in London at dmerritt1@bloomberg.net.

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