Stocks, Euro Fall as Commodities Drop; Spain Notes Slide

Stocks (MXWO) fell for a second day and the euro weakened on concern European leaders will struggle to resolve the debt crisis. Spain’s two-year notes stayed lower after a bill auction and commodities dropped.

The MSCI All-Country World Index lost 0.3 percent at 8:30 a.m. in New York. Standard & Poor’s 500 Index futures slid 0.2 percent. The Shanghai Composite Index dropped 0.9 percent amid escalating tensions with Japan, capping its biggest two-day loss since March. The euro depreciated 0.5 percent to $1.3052 and Spain’s two-year yield added three basis points to 3.37 percent. The S&P GSCI gauge of 24 raw materials slipped 0.8 percent, with nickel down 2 percent and soybeans falling 1.5 percent. New York oil declined 1.1 percent.

Rising yields may force Spain to seek assistance and submit to European Central Bank conditions for aid, ECB Governing Council member Luc Coene said yesterday. The country will consider a rescue to cut borrowing costs if the conditions are acceptable, Spanish Deputy Prime Minister Soraya Saenz de Santamaria said today. China and Japan’s worst diplomatic crisis since 2005 is threatening trade ties of more than $340 billion.

“There are still a number of areas of concern,” Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne, said in a telephone interview. “Investors will become increasingly nervous if a policy response doesn’t materialize in China. There are still tensions between European partners in terms of what shape and form the ultimate rescue takes. The devil lies in the detail.”

By Stephen Kirkland and Richard Frost
Read More: Bloomberg