Europe Stocks Fall With U.S. Index Futures as Euro Falls

Frankfurt (Oct 7)   European stocks fell for the first time in three days and the euro weakened as German industrial production slid more than economists forecast. Oil retreated back below $90 a barrel and U.S. equity-index futures (SPX) dropped.

The Stoxx Europe 600 Index dropped 1 percent at 7:51 a.m. in New York as Standard & Poor’s 500 Index futures fell 0.4 percent. Rio Tinto Plc jumped 4.7 percent in London after rejecting Glencore Plc’s merger approach. The euro weakened against 15 major counterparts. Russia’s Micex Index dropped as much as 1.3 percent while the ruble weakened 0.6 percent after the central bank spent at least $1.68 billion to prop up the currency over the last two days. Oil slipped 0.1 percent.

German industrial production plunged 4 percent in August, more than the 1.5 percent reduction predicted by economists and the biggest decline since 2009. The Federal Reserve releases minutes of its last meeting tomorrow, when Alcoa Inc. unofficially starts the U.S. earnings season. Fed officials including Simon Potter and William C. Dudley are scheduled to give speeches today.

“The current environment is shaky for equity markets,” Gerhard Schwarz, the Munich-based head of equity strategy at Baader Bank AG, said by telephone. “Investors are fearing bad news that has shown up in economic indicators will sooner or later have to show up in earnings disappointments.”

The Stoxx 600 had gained the past two days. Travel and leisure companies and health-care stocks declined the most. Morgan Stanley downgraded its rating on European drugmakers.

Ryanair Holdings Plc (RYA) dropped 4 percent after JPMorgan Chase & Co. lowered its rating on the stock. Separately, two of its planes touched while taxiing at the Dublin airport. EasyJet Plc declined 4.6 percent.

Selloff Resumes

Futures on the S&P 500 expiring in December lost 0.3 percent yesterday as small-capitalization shares resumed a selloff. Russell 2000 Index contracts declined 0.5 percent today after dropping 0.8 percent yesterday.

Rio rejected in August a merger approach from Glencore and said today has had no further contact over a potential deal that would have created the world’s largest mining company. Glencore’s London shares added 0.5 percent and Anglo American Plc gained 2 percent.

The cost of insuring European corporate debt rose after the biggest overhaul to the $17 trillion credit derivatives market yesterday. The Markit iTraxx Europe Index of credit default swaps on 125 investment-grade companies rose two basis points to 68 basis points, Bloomberg data show.

The euro weakened 0.4 percent to $1.26. Treasury 10-year notes rose, sending the yield one basis point lower to 2.41 percent. The U.S. will auction $27 billion of three-year notes today.

Ruble Depreciates

Russia’s Micex (INDEXCF) Index slid after yesterday surging 2.4 percent, the most since Sept. 3. The ruble depreciated to $39.9395. The nation’s central bank spent $980 million on Oct. 3, the biggest intervention to stem the ruble’s currency’s since President Vladimir Putin’s incursion into Ukraine in March. The finance ministry said it will hold a ruble-bond auction tomorrow.

Equities in Poland slipped 0.3 percent before an interest rate decision tomorrow, while the PX Index retreated 0.5 percent in Prague. Data today showed industrial output in the Czech Republic fell for the first time in 14 months.

West Texas Intermediate oil fell to as low as $89.67 a barrel. U.S. oil inventories rose by 2 million barrels last week, a Bloomberg survey showed before an Energy Information Administration report tomorrow.

Source:  Bloomberg