Spain Rating Cut
European equity futures fell, the euro weakened for the first time in four days and oil slid after Standard & Poor’s cut Spain’s credit rating. Asian stocks dropped as the Bank of Japan’s plan to boost monetary stimulus was overshadowed by weaker corporate profits.
Euro Stoxx 50 Index futures slumped 0.4 percent as of 7:01 a.m. in London. Standard & Poor’s 500 Index futures lost 0.5 percent and the MSCI Asia Pacific Index slipped 0.2 percent. The euro fell 0.3 percent to $1.3184, while the yen rose against most of its major peers. Ten-year Treasury yields lost five basis points to 1.89 percent, the lowest level since Feb. 6. German two-year note yields reached a record low of 0.083 percent. Oil slid 0.5 percent in New York.
Spain’s sovereign credit rating was cut to BBB+ from A by S&P on concern the nation will have to provide further fiscal support to the banking sector. Japan’s central bank expanded its asset-purchase fund to 40 trillion yen ($494 billion) from 30 trillion yen amid mounting calls from lawmakers to redouble efforts to spur economic growth.
“It does look as if the Spanish crisis is set to get worse before it gets better,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The knee-jerk reaction from the euro to the downgrade has been to the downside. It’s also taken some of the heat out of investors’ risk appetite.”
Spain’s short-term rating was lowered to A-2 from A-1, while the outlook on the long-term rating is negative, New York- based S&P said in a statement. Nobel Prize-winning economist Joseph Stiglitz said yesterday that Europe is in a “dire” situation as a focus on austerity pushes the continent toward “suicide.”
Japan’s benchmark 10-year bond yield fell 1.5 basis points to 0.895 percent, the lowest since October 2010. The BOJ also extended the maturity of bonds it buys to 3 years from a two- year limit. All 14 economists surveyed by Bloomberg News predicted an increase in the asset-purchase fund, the central bank’s main policy tool.
The Nikkei 225 Stock Average dropped 0.4 percent after earlier gaining as much as 1.4 percent. South Korea’s Kospi index added 0.6 percent.
Japan Tobacco Inc. slid 3.6 percent in Tokyo. Asia’s biggest listed cigarette maker by market value forecast this year’s annual profit will fall 1 percent, missing analysts’ estimates. Samsung Electronics Co. gained 2.8 percent. Asia’s largest consumer-electronics maker posted first-quarter profit that beat analysts’ estimates amid surging sales of Galaxy smartphones.
Foxconn International Holdings Ltd. tumbled 12 percent, the most in the MSCI Asia Pacific Index. The phone unit of the world’s biggest contract maker of electronics said its first- half net loss may widen “significantly” from a year earlier.
Declines in S&P 500 futures suggest the equity index may snap a three-day streak of gains, the longest in a month. The U.S. economy expanded at a 2.5 percent annual rate in the first quarter, after a 3 percent advance in the final three months of 2011, according to the median forecast of economists surveyed by Bloomberg News ahead of a Commerce Department report today.