By David Merritt Jan. 26 (Bloomberg) -- Stocks fell, sending the MSCI World Index to its longest losing streak in seven weeks, and commodities dropped on concern Chinese curbs on bank lending will curtail global growth. The yen and the dollar strengthened. The world index declined for a fifth day, retreating 0.6 percent at 12:12 p.m. in London. The Dubai Financial Market General Index sank 3.6 percent, the biggest loss among benchmark indexes. Futures on the Standard & Poor’s 500 Index fell 0.6 percent. Credit-default swaps on Chinese government debt jumped to a two-month high, according to CMA DataVision. Crude oil was 1.1 percent lower and copper slid 1.5 percent. Bank of China Ltd. and China Construction Bank Corp. were told to restrict new loans, according to people familiar with the matter, potentially slowing expansion in the world’s fastest-growing major economy. Record government borrowing is troubling investors even as economies rebound. Standard & Poor’s cut its outlook on Japan’s AA sovereign credit rating to “negative,” citing diminishing flexibility to cope with debt. “There’s a looming risk of governments making decisions that adversely affect the economy, and that’s materializing in China,” said Tim Brunne, a credit strategist at UniCredit SpA in Munich. “We’ve had a huge amount of fresh credit from banks supporting the Chinese economy and the question has always been if the money flooding into the economy was really helpful or driving asset bubbles.” Debt Concern While German business confidence rose more than economists forecast to an 18-month high, Fitch Ratings said European governments will need to borrow 2.2 trillion euros ($3.1 trillion) from capital markets in 2010. That amounts to 19 percent of GDP. The U.K. economy resumed growth at a slower pace than economists forecast in the fourth quarter. Service industries and manufacturing expanded just enough to pull Britain out of its longest recession on record. Europe’s Dow Jones Stoxx 600 Index fell for a fifth day, declining 0.6 percent to mark the longest losing streak since July. BHP Billiton Ltd., the world’s largest mining company, led commodity producers lower, falling 2.3 percent in London. Declines were limited as Siemens AG, Europe’s largest engineering company, rose 3 percent in Frankfurt after reporting the highest quarterly profit in more than two years. The MSCI Asia Pacific Index fell for a seventh day, dropping 1.8 percent to its lowest level in more than a month. Industrial & Commercial Bank of China Ltd. and Bank of China retreated more than 3 percent in Hong Kong. U.S. Futures The decline in U.S. futures indicated the S&P 500 may erase yesterday’s 0.5 percent advance, before reports that may show the drop in U.S. home prices abated and consumer confidence climbed, putting the biggest part of the economy further along the path to recovery. The S&P/Case-Shiller home-price figures are due at 9 a.m. New York time, while the Conference Board’s consumer confidence index is due at 10 a.m. A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the fourth quarter with a 73 percent increase in profits. More than 130 companies in the index are scheduled to release results this week, including U.S. Steel Corp, Johnson & Johnson and McGraw-Hill Cos. today. The MSCI Emerging Markets Index fell 2.1 percent as JPMorgan Chase & Co. downgraded Brazil’s stocks to “neutral.” Taiwan’s Taiex lost 3.5 percent and Russia’s Micex Index dropped 3.1 percent as oil prices slumped. Every developing-nation currency tracked by Bloomberg weakened against the dollar, led by a 1.7 percent decline in South Korea’s won after economic growth slowed more than estimated in the fourth quarter. Yen Advances The yen rose most versus the won, strengthening 2.4 percent, and the New Zealand dollar, gaining 1.9 percent, as investors sold higher-yielding currencies. The Dollar Index, which tracks the U.S. currency against of those of six major trading partners, snapped three days of declines to advance 0.4 percent. Crude oil for March delivery retreated 76 cents to $74.50 a barrel in New York. Copper for delivery in three months fell $120 to $7,325 a metric ton in London, leading a decline in industrial metals. China is the world’s second-biggest oil consumer and the biggest user of copper. Palladium for immediate delivery declined 2.4 percent to $431.88 an ounce and platinum dropped 1.8 percent to $1,520.88 an ounce. ‘The cost of insuring against losses on European corporate bonds climbed for a sixth day, with the benchmark Markit iTraxx Crossover Index of credit-default swaps rising 4 basis points to 458, according to JPMorgan Chase & Co. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan increased 4 basis points to 105 and swaps on Japanese sovereign debt increased 2.5 basis points to 88, the highest since April, CMA prices show. China’s sovereign default swaps rose 3.5 basis points to 84. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net.

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