By Justin Carrigan Jan. 20 (Bloomberg) -- The yen and dollar rose on concern China’s moves to curb bank lending will slow the global economic recovery. Drugmaker shares gained on speculation the Democrat Party’s loss of a key Senate seat will derail President Barack Obama’s attempts to overhaul the U.S. health-care system. The yen and the dollar advanced against all of the major currencies at 10:23 a.m. in London. China’s Shanghai Composite Index fell 2.9 percent, dragging the MSCI Emerging Markets Index down 0.6 percent. The MSCI World Index of 23 developed nations’ stocks slid 0.2 percent, with losses limited by a 0.2 percent gain in its health-care stocks. Futures on the Standard & Poor’s 500 Index lost 0.3 percent. Demand for the relative safety of the yen and the dollar was buoyed after Liu Mingkang, China’s chief banking regulator, said some banks were asked to reduce lending after a record 9.59 trillion yuan ($1.4 trillion) in new loans last year. Republican Scott Brown won a Senate seat in Massachusetts, giving his party enough members to block votes on the government’s proposed bill to revamp the U.S. health-care system. “The fear is that Chinese authorities may have no choice but to slam the brakes,” said Neil Mellor, a currency strategist at BNY Mellon Corp. in London. In the U.S. “there is a good chance that the bill will now be blocked and the market has heaved a huge sigh of relief,” he said. The yen climbed 0.8 percent versus the euro and 0.3 percent compared with the dollar. The U.S. currency strengthened 0.5 percent to trade at a five-month high against the euro. Greek Bonds Tumble Europe’s common currency declined after International Monetary Fund Managing Director Dominique Strauss-Kahn said in an interview in Hong Kong that Greece’s budget woes are “a serious problem.” Greek bonds tumbled, sending the premium investors demand to hold the government’s 10-year bonds instead of similar-maturity benchmark German debt to 280 basis points, the widest spread since March 17. The yield on the two-year note jumped 40 basis points to 4.06 percent. The New Zealand dollar declined against all 16 of its most- traded counterparts after the nation’s statistics department said consumer prices slipped 0.2 percent in the fourth quarter from the previous three months, damping the prospects for interest-rate increases. Drugmakers Gain The MSCI Emerging-Markets Index lost 0.6 percent. China Construction Bank Corp. sank 3.1 percent and PetroChina Co. dropped 1.7 percent in Hong Kong. Declines were limited as health-care stocks rallied. Takeda Pharmaceutical Co. gained 1.7 percent in Tokyo, while Astellas Pharma Inc., which gets 27 percent of its sales from North America, climbed 2.7 percent. The Dow Jones Stoxx 600 Index fluctuated between gains and losses. The Dow Jones Stoxx 600 Health Care Index added 0.9 percent. GlaxoSmithKline Plc, Britain’s biggest drugmaker, added 1.5 percent in London. Sanofi-Aventis added 1.7 percent in Paris, while Merck KGaA advanced 2.6 percent in Frankfurt. Rio Tinto Group led mining companies lower as metals declined. Technology stocks rallied after International Business Machines Corp., the world’s largest computer-services company, said yesterday 2010 profit will top its earlier target. ASML Holding NV, Europe’s largest maker of semiconductor equipment, jumped 4.3 percent in Amsterdam after reporting profit that beat analysts’ estimates. The decline in U.S. futures indicated the S&P 500 may retreat from yesterday’s 15-month high. Morgan Stanley and Bank of America Corp. are among U.S. companies that report earnings later today. U.S. Economy Reports on U.S. construction and producer prices are scheduled for today. Housing starts were probably little changed in December, economists said before a Commerce Department release due at 8:30 a.m. in Washington, while a separate report from the Labor Department, also due at 8:30 a.m., may confirm inflation slowed in December. Crude oil fell 1 percent to $78.26 a barrel in New York trading. Copper for delivery in three months declined 0.7 percent to $7,495 a metric ton in London, leading declines in industrial metals. Gold for immediate delivery retreated 0.6 percent to $1,131.98 an ounce, while palladium dropped 1.2 percent to $461 an ounce, its first reversal in six days. The cost of protecting against a default on European corporate bonds rose, with credit-default swaps on the high- yield Markit iTraxx Crossover Index climbing 7 basis points to 417, according to JPMorgan Chase & Co. prices at 9:23 a.m. in London. The index is a benchmark for the cost of protecting bonds against default and an increase indicates a deterioration in perceptions of credit quality. The yield on the 10-year Treasury note declined 3 basis points to 3.67 percent, while the 10-year German bund yield was down 2 basis points at 3.49 percent. To contact the reporter on this story: Justin Carrigan in London on jcarrigan@bloomberg.net.

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