BLBG: Stocks Fall, Oil Rises, Dollar Strengthens After Mubarak Refuses to Resign
Stocks fell for a third day and U.S. index futures declined while the dollar and oil rose after Egyptian President Hosni Mubarak defied calls for his resignation and corporate earnings disappointed investors.
The MSCI World Index lost 0.5 percent at 10:05 a.m. in London, and Standard & Poor’s 500 Index futures sank 0.6 percent. The dollar strengthened against 15 of its 16 most- traded peers, while the yield on the 10-year Treasury note slipped four basis points to 3.66 percent. Egypt’s 10-year bond yield jumped 27 basis points. Oil advanced as much as 1.1 percent in London.
Mubarak handed day-to-day powers to Vice President Omar Suleiman while reiterating plans to stay on until elections in September, prompting U.S. President Barack Obama to urge Egyptian authorities to take further steps to resolve the crisis. The number of companies beating earnings estimates has slowed, with 56 percent of the firms in the MSCI World that have reported fourth-quarter results since Jan. 10 topping projections, down from 61 percent in the previous quarter.
“These latest developments in Egypt will be negative on sentiment for the market,” Kelvin Tay, Singapore-based chief investment strategist for UBS Wealth Management, said in a Bloomberg Television interview.
Nokia, L’Oreal
The Stoxx Europe 600 Index slid 0.6 percent as three companies fell for every two that rose. Nokia Ojy tumbled 8.3 percent after saying it’s forming a partnership with Microsoft Corp., highlighting the depth of its challenge in taking on Google Inc. and Apple Inc. L’Oreal SA, the world’s largest cosmetics maker, fell 5 percent after fourth-quarter sales and profitability missed estimates. ThyssenKrupp AG slid 1.7 percent after saying profit fell.
The MSCI Asia Pacific Index tumbled 0.7 percent. Newcrest Mining Ltd., Australia’s biggest gold producer, dropped 1.4 percent after posting first-half earnings that missed estimates. Hana Financial Group Inc., South Korea’s fourth-largest financial company, declined 5.7 percent after announcing a share sale to fund the purchase of Korea Exchange Bank.
The decline in U.S. futures indicated the S&P 500 may trim its weekly advance. Expedia Inc. slumped 12 percent in Germany after posting earnings that lagged forecasts. Kraft Inc. lost 1.5 percent after lowering its full-year profit forecast because of rising commodity costs.
Trade Deficit
The U.S. trade deficit probably widened in December for the first time in four months as the cost of imported oil climbed, economists said before a report from the Commerce Department, due at 8:30 a.m. New York time. At 9:55 a.m., the Thomson Reuters/University of Michigan consumer sentiment index may show confidence climbed this month, a survey of economists showed.
The dollar appreciated 0.6 percent against the euroand climbed 0.3 percent versus the yen. The Australian dollar fell below parity with the U.S. currency for the first time in more than a week, depreciating 0.6 percent, after the country’s central bank Governor Glenn Stevens said policy makers judged it “sensible of late” to leave interest rates unchanged.
German 10-year bunds rose, with the yield falling two basis points to 3.28 percent. The two-year note yield slid three basis points to 1.43 percent. Greek 10-year bonds fell for the seventh consecutive day, the longest run of declines since Nov. 5.
The yield on Egypt’s dollar bonds due 2020 jumped to 6.77 percent, the highest in almost two weeks. The cost of insuring government debt soared 38 basis points to 375, the biggest increase in more than a week, according to CMA prices for credit-default swaps.
Egypt’s Military
Global depositary receipts for Orascom Construction Industries, the country’s biggest publicly traded builder, tumbled fell 5 percent in London.
The Egyptian army’s supreme military council said today it will guarantee the implementation of the measures announced by Mubarak, including an end to the emergency law once the situation permits and the amendment of the constitution. The army will guarantee the peaceful transition to free and fair elections within the set timetable, according to the statement.
Speculation that unrest may curb oil flows through Egypt’s Suez Canal and spread to other oil-producing nations in the Middle East has kept Brent crude prices above $100 a barrel for most of the past two weeks. Brent for March delivery rallied 93 cents to $101.80 a barrel on London’s ICE Futures Europe.
“The crisis in Egypt may take on a more menacing tone, increasing the risk of interruptions to the Suez Canal and Suez- Mediterranean pipeline,” JBC Energy, a Vienna-based research company, wrote today in a report.
Cotton led gains in commodities, rising 2.7 percent to a record $1.9263 a pound. Raw sugar jumped 0.2 percent and wheat climbed 0.7 percent.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net.
To contact the editor responsible for this story: Stuart Wallace at swallace@bloomberg.net.
