Stocks End Longest Rally in 11 Months

Stocks End Longest Rally in 11 Months; Treasuries Advance

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By Stephen Kirkland and Esme Deprez

June 22 (Bloomberg) -- Global stocks fell, with the MSCI World Index halting the longest rally in 11 months, on concern the recent advance overshot prospects for the economy. Treasuries rose after a sale of two-year notes drew a record low yield, while China’s yuan dropped following yesterdays surge.

The MSCI gauge 24 developed nations lost 0.5 percent at 1:21 p.m. in New York, ending a 10-day streak of gains. The MSCI Emerging Markets Index slid 1 percent, halting its longest rally since 2005. U.S. benchmark indexes fluctuated as an unexpected drop in home sales tempered gains in technology shares. The yuan lost 0.2 percent per dollar. Oil fell for the first time in three days. Ten-year Treasury yields slipped below 3.2 percent.

The pullback in stocks came before leaders of the Group of 20 industrialized nations meet June 26 to consider ways to reduce deficits and tackle unprecedented levels of government debt without harming the global economic recovery. In the U.K., Chancellor of the Exchequer George Osborne lowered the country’s economic forecast and announced spending cuts and some tax increases to narrow the budget gap.

“The market is constantly trying to figure out if the world is going back down into a double dip or if the economic expansion can be sustained,” said Rod Smyth, chief investment strategist at Riverfront Investment Group in Richmond, which manages $2 billion. Today’s housing numbers “are fodder for the bears.”

The S&P 500 was little changed after rising as much as 0.5 percent in the first half-hour of trading. Home Depot Inc. and Alcoa Inc. had the biggest declines in the Dow Jones Industrial Average.

Housing Data

Purchases of existing houses decreased 2.2 percent to a 5.66 million annual rate, the National Association of Realtors said. To receive a government incentive worth as much as $8,000, buyers must have signed contracts by the end of April and need to complete deals by the end of this month. The decline raises the risk the retrenchment following the expiration of the tax credit.

Technology shares in the S&P 500 rose 0.6 percent as a group, helping to buoy the benchmark index. Apple Inc. gained 2 percent after saying it sold 3 million iPads in the 80 days since the device went on the sale in the U.S., adding to evidence Chief Executive Officer Steve Jobs is building demand for tablet-style computers.

The Stoxx Europe 600 Index of equities in 18 western European countries fell 0.5 percent, snapping a nine-day rally, the longest winning streak in 11 months. Commodity producers led the retreat, with BHP Billiton Ltd., the world’s biggest mining company, falling 2.1 percent in London. BNP Paribas SA led declines by the region’s banks, falling 1.9 percent in Paris after Fitch Ratings cut its credit rating on France’s biggest lender.

Canon, Mitsui

The MSCI Asia Pacific Index slipped 0.8 percent, its first drop in nine days. Newcrest Mining Ltd., Australia’s biggest gold producer, declined 1.8 percent in Sydney. Canon Inc., a Japanese camera maker that counts Europe as its biggest market, dropped 2.7 percent in Tokyo.

“With the gains we had in markets in recent days, and given that the ongoing economic problems are still very much around us, there’s room for profit taking at these levels,” said Francisco Salvador, co-strategist at Iberian Equities in Madrid. “The yuan revaluation has not come with the strength that many expected, nor it will have the wide effect many hoped for.”

Emerging Markets

The MSCI Emerging Markets Index retreated for the first time in 11 days, dropping 0.9 percent. The Dubai Financial Market General Index lost 1.4 percent after index provider MSCI Inc. kept the United Arab Emirates as a frontier market, disappointing some investors who anticipated an upgrade to emerging market status. South Korea’s won declined 0.9 percent against the dollar to lead declines in major currencies.

China’s yuan weakened the most since 2008 on speculation the central bank will intervene to limit gains after dropping a two- year peg to the dollar over the weekend, a move that sent the Chinese currency surging 0.4 percent yesterday.

The yen strengthened against 14 of 16 of its major counterparts, while the Swiss franc rose to a record against the euro.

Copper for September delivery rose 1.6 percent to $3.0075 a pound in New York, adding to yesterday’s 2 percent rally.

Treasuries rose after the sale of $40 billion in two-year notes drew a record low yield of 0.738 percent. The average yield forecast was 0.751 percent in a Bloomberg News survey of 8 of the Federal Reserve’s 18 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.45, compared with an average of 3.10 for the previous 10 sales. The amount of the sale was $2 billion less than the prior sale, the second straight reduction.