Stocks slid the most since June and oil surged to an 18-month high amid concern the U.S. will take military action against Syria. Treasuries, the yen and gold rose while Turkey’s lira and India’s rupee reached record lows.
The MSCI All-Country World Index dropped 1.3% at 4 p.m. in New York as the Standard & Poor’s 500 Index fell 1.6%, the worst declines in two months for both. Dubai’s benchmark gauge plunged 7%. Japan’s currency appreciated versus all 31 major counterparts and government bonds of the U.S., Germany and the U.K. rallied. The lira tumbled passed 2 per dollar for the first time and the rupee sank to 66.19 versus the dollar. Crude jumped 2.9% to $109.01 a barrel in New York and gold rose 1.9% to $1,420.20 an ounce.
U.S. benchmark stock indexes erased gains in the final hour of trading yesterday as Secretary of State John Kerry said yesterday that President Barack Obama believes there must be accountability for the “moral obscenity” of using chemical weapons in Syria, fanning concern unrest may disrupt Middle East oil supplies. An Ifo institute report today showed German business confidence rose for a fourth month in August, while U.S. data showed home prices increased at a slower rate and consumer confidence held near a five-year high.
“In the short-term, any type of uncertainty and conflict in the Middle East has negative implications, especially on the oil markets and secondarily the equity markets,” Tim Hoyle, director of research at Radnor, Pennsylvania-based Haverford Investments, which oversees about $6 billion of assets, said in a phone interview. “That causes investors to take stock of what they own and re-assess their risk tolerances.
Potential Response
Kerry didn’t say whether the U.S. would seek a mandate from the United Nations for potential responses. Russia, an ally of Syria that has a veto on the UN Security Council, has blocked previous UN action against Syria. Iran, another Syrian ally, has warned that a military strike against Syria will have ‘‘great consequences for the region,’’ Foreign Ministry spokesman Abbas Araghchi told reporters in Tehran today.
The U.K. Parliament was recalled from its summer recess and will meet Aug. 29 to debate the response to the suspected use of chemical weapons in Syria, Prime Minister David Cameron said. British armed forces are making contingency plans following an alleged attack in the Ghouta area outside Damascus on Aug. 21 that opposition groups say killed more than 1,300 people. The U.K. has said it’s convinced chemical weapons were used and that Syrian President Bashar al-Assad’s government is responsible.
‘Being Punished’
‘‘For anyone who thought that the Arab Spring was going to be a temporary situation, it’s proven to not be the case,” Erik Wytenus, Hong Kong-based head of foreign exchange and commodities at JPMorgan Private Bank in Asia, said on Bloomberg Television’s “On the Move” with Rishaad Salamat. “You’ve got a bit of short-term, safe haven, flight-to-quality bid. Emerging markets are being punished by severe capital outflows, which are hitting their currencies inordinately hard.”
Financial, technology and industrial shares lost at least 2% to lead declines among all 10 main industry groups in the S&P 500. Microsoft Corp., Bank of America Corp. and JPMorgan Chase & Co. slid more than 2% to lead declines in the Dow Jones Industrial Average. Southwest Airlines Co. tumbled 3.5% amid concern surging oil prices will boost fuel costs.
D.R. Horton and PulteGroup Inc. slid more than 3% as a report showed gains in home prices have slowed. Best Buy Co. lost 2.3% after Richard Schulze, the electronics retailer’s founder and largest shareholder, said he plans to sell an undisclosed amount of its stock to diversify his assets and raise money.
Economic Data
The Conference Board’s index of U.S. consumer confidence increased to 81.5 in August from 81 the prior month. The median forecast in a Bloomberg survey called for a reading of 79. Another report today showed home prices increased at a slower pace in June. The S&P/Case-Shiller index of property values climbed 12.1% from the same month in 2012 after rising 12.2% in the year ended in May, the biggest gain since March 2006.
Ten-year Treasuries rose for a fourth day, pushing the yield seven basis points lower to 2.72%. The U.S. will hit the $16.7 trillion debt ceiling in mid-October, Treasury Secretary Jacob J. Lew said, urging Congress to raise the limit “as soon as possible.”
European Markets
The Stoxx Europe 600 Index lost 1.8%, the biggest drop since June, as 18 of 19 industry groups retreated. Trading was 21% higher than the 30-day average, according to data compiled by Bloomberg.
Polymetal International Plc plunged 8.5% as HSBC Holdings Plc downgraded its recommendation on the Russian gold and silver miner part-owned by billionaire Alexander Nesis.
The MSCI Emerging Markets Index declined 1.7%, the most on a closing basis since July 3. The Philippine Stock Exchange Index tumbled 4% amid protests over government spending and the Thai SET Index slumped 2.7%, extending declines from this year’s peak to more than 20%. The Sensex Index sank 3.2% in Mumbai. The Jakarta Composite index retreated 3.7%.
The lira slid as much as 2.1% to 2.0398 per dollar and Turkey’s benchmark equity gauge slipped 4.7%. Turkey will join a coalition against Syria if the UN fails to take action, Milliyet newspaper reported, citing Foreign Minister Ahmet Davutoglu.
Dubai Plunges
Dubai’s DFM General Index plunged 7% for its worst decline since 2009 and biggest decline among more than 90 global benchmarks tracked by Bloomberg. Emaar Properties PJSC, the United Arab Emirates’ biggest publicly traded developer, lost the most since January 2010, and Gulf Navigation Holding, whose tanker fleet ship oil and gas, slid 9.4%. The seven Persian Gulf benchmarks fell.
The Bloomberg U.S. Dollar Index, a gauge of the currency against six major peers, lost 0.3%.
The yen advanced for a second day, strengthening 1.5% to 97.09 per dollar as investors sought the currency as a refuge. Against the euro, it rallied 1.3% to 130.01 yen. The 17-nation shared currency increased 0.2% to $1.3390.
The rate on 10-year German bunds dropped 4.7 basis points to 1.85% and the 10-year gilt yield tumbled 12 basis points to 2.60%.
The cost of insuring against losses on corporate bonds rose, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies increasing 6.7 basis points to 107.5 basis points, the highest since July 12.
Brent crude oil jumped 3.3% to $114.36 a barrel to lead gains in the commodities. The Middle East accounted for 35% of global oil output in the first quarter of this year, according to data from the International Energy Agency.
Soybeans retreated 1.4% after gaining 4.6% yesterday on speculation of crop damage from hot, dry weather in the U.S. Midwest. Corn declined 2.9% after jumping 6.5% yesterday.
