“Stocks (MXAP) and industrial metals fell as manufacturing shrank in Europe and China. The euro weakened and the cost of insuring the region’s debt rose after the Dutch government split and French President Nicolas Sarkozy lost ground in elections.
The MSCI All-Country World Index (MXWD) slid 0.8 percent at 12:50 a.m. in London as an index of Dutch stocks sank to a four-month low. Standard & Poor’s 500 Index futures dropped 1 percent. Copper, zinc and lead declined at least 1.4 percent. The euro weakened 0.6 percent versus the dollar and the yen strengthened against all 16 of its most-traded peers. The cost of insuring European sovereign debt jumped to the highest in more than a month. The extra yieldinvestors demand to hold Dutch 10-year bonds over German bunds rose to a three-year high.
Euro-area services and manufacturing declined more than estimated in April, while data indicated China’s production will contract for a sixth month, according to a Markit Economicsand HSBC Holdings Plc. Sarkozy’s hopes of a second term rest on winning voters from the anti-euro National Front before the final round of elections. Dutch Prime Minister Mark Ruttefailed to reach a deal with a coalition party over austerity measures.
“Politics will undoubtedly provide the pepper in this week’s financial melting pot,” said Bill Blain, co-head of the special situations group at Newedge Group Ltd. in London. “A turnover in the Dutch government, and the inevitable swing toward more skeptical anti-Europe politics could well generate increased uncertainty.”
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