By Nick Baker and Stuart Wallace Dec. 8 (Bloomberg) -- Stocks, gold and oil fell, Treasuries advanced and the yen and dollar strengthened as credit-rating companies highlighted the risk of government deficits and German industrial production unexpectedly dropped. The MSCI Emerging Markets Index and futures on the Standard & Poor’s 500 Index extended their declines to more than 0.6 percent at 7:18 a.m. in New York after a document obtained by Bloomberg News showed Dubai World’s property developer Nakheel PJSC lost $3.65 billion. Gold slumped 0.8 percent in New York for a third straight drop while crude posted a fifth consecutive retreat. Yields on 10-year Treasuries fell five basis points to 3.38 percent. The yen gained against all 16 of the most-active currencies, and the dollar rose versus 14. Moody’s Investors Service said today deteriorating public finances in the U.S. and U.K. may “test the Aaa boundaries.” Fitch Ratings downgraded Greece’s credit grade to BBB+. U.S. Federal Reserve Chairman Ben Bernanke told the Washington Economic Club yesterday that the U.S. economy faces “formidable headwinds,” while Japan’s government backed a stimulus package worth 7.2 trillion yen ($81 billion). “Central banks and governments around the world are totally right in saying that the recovery is still very weak,” Philippe Gijsels, a senior structured product strategist at Fortis Global Markets in Brussels, said in an interview with Bloomberg Television. “Going into 2010 I would be extremely surprised if we do not see a serious hiccup somewhere.” Unexpected Drop German industrial output unexpectedly fell for the first time in three months in October, led by a drop in production of energy and investment goods such as machinery. Output decreased 1.8 percent from September, when it advanced 3.1 percent, the Economy Ministry in Berlin said today. Economists forecast a 1 percent gain, according to the median of 38 estimates in a Bloomberg survey. Nakheel, the Dubai World-owned property developer seeking to renegotiate debt, had a first-half loss of 13.4 billion dirhams ($3.65 billion) as revenue fell and it wrote down the value of land and property, according to a document obtained by Bloomberg News. The loss for the company, which is building palm tree-shaped islands off the emirate’s coast, compared with a year-earlier profit of 2.65 billion dirhams, the company’s financial statement for the six months through June showed. A spokesman for Dubai World, Nakheel’s parent, wouldn’t comment. Greece, Ireland Drop The MSCI World Index of 23 developed nations’ stocks slumped 0.5 percent. The Dow Jones Stoxx 600 Index fell 1.5 percent as benchmark indexes in Greece, Ireland and Germany lost at least 2 percent. Tesco Plc retreated 2.6 percent in London after reporting less sales growth than analysts estimated. Futures on the S&P 500 dropped 0.8 percent, reversing a 0.3 percent advance spurred by FedEx Corp.’s profit estimate that topped the average analyst forecast. The benchmark gauge for U.S. equities has surged 63 percent since March 9, the steepest advance since the Great Depression, spurred by record-low interest rates and $12 trillion committed by governments worldwide. The measure is valued at 22.2 times the reported operating earnings at its companies from the past year, the most expensive level since 2002, according to data compiled by Bloomberg. Dubai shares fell the most among benchmark indexes tracked by Bloomberg, extending its decline since Nov. 16 to 25 percent. On Nov. 25, the government said it was seeking a “standstill” agreement on Dubai World’s debt. To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Stuart Wallace in London at swallace6@bloomberg.net.

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