European index futures (SPA) dropped with the euro and stocks in Asia amid escalating tensions over Ukraine and concern that stronger U.S. growth will lead to sooner-than-projected interest-rate increases. New Zealand’s dollar and emerging-market currencies weakened.

Futures on the Euro Stoxx 50 Index slumped 0.7 percent by 7:22 a.m. in London and the euro weakened as German factory orders unexpectedly contracted. The MSCI Asia Pacific Index (MXAP) slipped 0.5 percent as most major benchmarks in the region dropped. Futures on the the Standard & Poor’s 500 Index added 0.1 percent after the measure closed at a more-than two-month low. The kiwi retreated 0.4 percent while Turkey’s lira and India’s rupee weakened at least 0.4 percent. Wheat advanced.

The fastest growth in U.S. service industries since 2005 added to evidence for a self-sustaining recovery in the world’s largest economy and increased speculation the Federal Reserve may start considering when to raise interest rates. Equity losses deepened after Poland said a buildup of Russian troops near Ukraine could presage invasion and Russia called for a humanitarian intervention to head off a “catastrophe” in East Ukraine. German factory orders fell the most September 2011 in June.

“The market is overextended and I think the geopolitical risk we are seeing at the moment is an excuse for people to take profit,” Donald Williams, chief investment officer at Platypus Asset Management Ltd. in Sydney, which oversees about A$1.6 billion ($1.5 billion), said by phone. “There’s quite a bit of unrest obviously. It’s unlikely it will turn into something intractable.”

Asia Gauges

About two stocks fell for each that gained on the Asia-Pacific gauge today, with all 10 industry groups declining. The measure trades at 13.4 times estimated earnings while the S&P 500 is at 16.1 and the Stoxx Europe 600 Index is valued at 15.1 times projected profit.

Telecommunications services companies led declines in the MSCI Asia Pacific gauge as SoftBank tumbled 3.5 percent in Tokyo. Japan’s Topix index fell a fifth day, headed for the lowest close since June 18. Softbank has the third-largest weighting in the Topix, according to data compiled by Bloomberg.

Sprint Corp., controlled by SoftBank, ended talks to buy T-Mobile US Inc. after an impasse, a person with knowledge of the matter said. Sprint plans to name a new chief executive officer, said the person, who asked not to be identified because the information is private.

China Stocks

The Hang Seng Index dropped 0.3 percent in Hong Kong while a gauge of Chinese shares in the city retreated 0.5 percent. The Shanghai Composite Index fluctuated.

Australia’s S&P/ASX 200 Index dropped a fourth day, declining 0.1 percent. The Kospi index in Seoul retreated 0.3 percent.

The S&P 500 lost 1 percent to close at 1,920.21 in New York, while MSCI’s All-Country World Index fell 0.7 percent yesterday to the lowest level since May 23.

Polish Foreign Minister Radoslaw Sikorski said on local TV yesterday that Russia had restored its combat readiness on the Ukraine border. Such actions could be used to “exert pressure or to invade,” he said without giving any indication that an incursion was imminent.

About 117,000 peple have been displaced inside Ukraine and some 730,000 others left for Russia since the conflict between pro-Russian separatists and Ukrainian government forces erupted, Vincent Cochetel, director of the UN Refugee Agency’s Europe bureau, said at a briefing in Geneva yesterday.

Dollar Strength

The ruble was little changed at 36.1040 per dollar and 48.2220 to the euro. The Micex Index of Moscow stocks dropped 0.6 percent to the lowest since May 7. Ukraine’s hryvnia dropped 0.2 percent to 12.3685 to the dollar.

The dollar maintained gains after the Institute for Supply Management’s non-manufacturing index increased to 58.7, exceeding the highest estimate in a Bloomberg survey of economists, from the prior month’s 56.

Prospects for the world’s largest economy are improving as the group’s orders index reached an almost nine-year high, reflecting broad-based gains. Combined with another report showing factory bookings are also jumping, the pickup in demand raises the odds the job market will extend its recent progress.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, increased 0.1 percent after yesterday closing at the highest level since Feb. 12. The dollar reached an almost nine-month high versus the euro yesterday, before the European Central Bank reviews monetary policy tomorrow. The euro fell to $1.3349 today, the lowest level since Nov. 11.

Milk Auction

German factory orders, adjusted for seasonal swings and inflation, slid 3.2 percent in June from May, when they fell a revised 1.6 percent, the Economy Ministry in Berlin said today. Economists forecast an increase of 0.9 percent, according to the median of 30 estimates in a Bloomberg News survey.

The kiwi dropped as much as 0.5 percent to 84.24 U.S. cents, the weakest intraday level since June 5, after losing 0.7 percent last session. Prices for whole-milk powder at the twice-monthly GlobalDairyTrade auction slid 11.5 percent to the lowest price since August 2012, bringing their decline from a February peak to 46 percent.

The won weakened to 1,034.4 per dollar after the currency rose 0.5 percent yesterday in a second straight day of gains. Indonesia’s rupiah weakened 0.5 percent while the Indian rupee retreated 0.8 percent to 61.3225.

West Texas Intermediate crude rose as much as 0.4 percent to to $97.72 a barrel after sliding 0.9 percent last session to the lowest settlement price since February.

U.S. crude supplies shrank by 5.5 million barrels last week, the American Petroleum Institute was said to report yesterday. Data from the Energy Information Administration today is projected to show inventories slid by 1.55 million, according to a Bloomberg survey of analysts. Kurdish oil exports remain unaffected by the turmoil in Iraq, producer Genel Energy Plc said.

Wheat futures for September delivery climbed a sixth day, adding 0.9 percent to $5.575 a bushel, and touching the highest price since July 17.

 

Source: bloomberg

---