BLBG: Pound Falls on Asset-Purchase Speculation; European Stocks Drop
The pound fell to the lowest level in more than six months against the euro on speculation the Bank of England will expand its asset-purchase program, while European stocks slid after German investor confidence dropped.
The British currency slipped against all but one of its 16 most-traded peers as of 9:55 a.m. in London. Europe’s benchmark Dow Jones Stoxx 600 Index fell 0.3 percent after the ZEW Center for European Economic Research in Mannheim reported an unexpected decline in its index of investor expectations decreased. Corn and soybeans weakened in Chicago trading.
The Bank of England should extend its bond-buying program by 25 billion pounds ($39 billion) to 200 billion pounds to revive the recession-bound economy, the British Chambers of Commerce said, while central banks around the world consider ending so-called quantitative easing. The ZEW index slipped to 56 in October from 57.7 the previous month even after the DAX stock index rallied 57 percent since March.
“The U.K. economy is going to be lagging behind the global recovery story,” said Hans-Guenter Redeker, head of global currency strategy in London at BNP Paribas SA, France’s largest bank. “Sterling is going to remain fairly weak.”
Futures on the Standard & Poor’s 500 Index slipped 0.2 percent, indicating the benchmark gauge for U.S. equities may retreat from a one-year high, after Meredith Whitney downgraded Goldman Sachs Group Inc. before the bank reports earnings Oct. 15. JPMorgan Chase & Co., Bank of America Corp., Intel Corp., and Johnson & Johnson are scheduled to post results this week.
U.K. Inflation
The pound weakened 0.5 percent against the euro to trade at more than 94 pence for the first time since March 27. The Office for National Statistics said U.K. consumer prices rose 1.1 percent in September from a year earlier, less than the 1.3 percent median estimate in a Bloomberg News survey of 31 economists. UBS AG, the world’s second-biggest currency trader, today cut its forecasts for the pound.
New Zealand’s dollar climbed the most against the pound, rising 0.9 percent, and advanced against all 16 most-traded currencies after the government said retail sales rose 1.1 percent in August, the most since 2007 and more than twice the pace forecast by economists.
Treasuries rose for the first time in three days, with the yield on the benchmark 10-year note falling 4 basis points to 3.34 percent, before the Federal Reserve buys securities as part of its quantitative-easing program.
Bank Stocks
Banks led the drop in European shares. A seven-month, 54 percent rally has left the Stoxx 600 valued at 46.9 times earnings, near the most expensive level since June 2003, weekly data compiled by Bloomberg show.
Lloyds Banking Group Plc sank 3.9 percent in London after a person familiar with the matter said the U.K.’s biggest mortgage lender would have to pay as much as 2 billion pounds ($3.2 billion) to end its participation in the U.K.’s Asset Protection Scheme.
Goldman Sachs fell 1.1 percent in pre-market New York trading. Whitney, who correctly predicted in 2007 that Citigroup Inc. would cut its dividend, reduced her rating to “neutral.” Previously, Goldman Sachs had been her only “buy.”
The drop in futures indicated the S&P 500 may slip for the first time in seven days. Companies in the index are projected to report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to earnings growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show.
Russian Stocks
Russian stocks led declines in eastern Europe after the nation’s Micex Index traded at 14.5 times reported earnings, the highest level since at least July 2003, according to data compiled by Bloomberg. The Micex fell for the first time in seven days, losing 1.2 percent for the steepest retreat among equity benchmark indexes in the world’s 25 biggest markets.
Corn fell from a three-month high, declining 0.5 percent to $3.7925 a bushel, as investors judged yesterday’s 5.2 percent jump excessive. Soybeans retreated 0.5 percent to $9.9425 a bushel. Crude oil added 0.7 percent to $73.76 a barrel. Gold for immediate delivery rose 0.6 percent to a record $1,063.95 an ounce in London.
