May 8, 2012 Bloomberg:

Stocks and commodities slid, while the euro extended its longest slump since 2008, as concern that new Greek political leaders will back out of bailout agreements sent the nation’s benchmark equity index to an almost 20-year low.

The MSCI All-Country World Index (MXWD) sank 1.1 percent at 2:04 p.m. and reached the lowest level since January. The Standard & Poor’s 500 Index tumbled 1.1 percent to a two-month low, while Greece’s ASE index plunged 3.6 percent to close at the lowest level since November 1992. Copper and oil lost more than 1 percent as the S&P GSCI Index of commodities declined for a fifth day. The euro fell for a seventh day, losing 0.2 percent to $1.3026. Ten-year Treasury yields neared a three-month low
Speculation that Greece’s next government will reject terms of its financial rescue grew as New Democracy leader Antonis Samaras said he failed to form a coalition government following the weekend election, passing the opportunity to Alexis Tsipras’s Syriza party. Tsipras said he plans to form a government of left-wing parties that would nationalize banks, repeal recent labor reforms and cancel the bailout accords.

“The situation in Europe could get worse before it gets better,” said James McDonald, chief investment strategist at Northern Trust Corp. in Chicago. His firm manages $715 billion. “The concern is about the potential that Greece does not carry through on their agreements and they default and leave the euro. While investors have known Greece is going to be challenged to handle their debt load, it’s another thing to watch unfold.”

Market Leaders

The S&P 500 dropped for the fourth time in five days, extending its retreat from a four-year high last month to 4.5 percent, as consumer-discretionary, commodity and financial companies led losses in all 10 of the main industry groups. Hewlett-Packard Co. and Bank of America Corp. lost at least 2.5 percent to lead the Dow Jones Industrial Average down as much as 198 points.

McDonald’s Corp., the world’s largest restaurant chain, retreated 2.4 percent after April sales trailed analysts’ projections. Electronic Arts Inc. (EA), the second-largest U.S. video-game publisher, declined 5 percent after its forecasts fell short of estimates. Fossil Inc., owner of the namesake watch brand, plunged 38 percent after the company reduced its full-year earnings forecast amid weakness in Europe.

The 10-year U.S. Treasury note yield fell for the third straight day, losing three basis points to 1.84 percent, near the lowest level since February 3. The government sold $32 billion of three-year notes to day, the first of three sales this week totaling $72 billion.

Treasury Bets

Treasuries investors reduced bets the securities will advance and raised neutral positions to the highest in a month, according to a weekly survey by JPMorgan Chase & Co.

The proportion of “net longs” was cut to zero from six percentage points last week as the level of outright longs dropped to equal the level of outright shorts, which was unchanged at 17 percent. A long position is a bet that an asset will increase in value, while a short is a wager it will decrease.

The Stoxx Europe 600 Index (SXXP) slid 1.7 percent, erasing yesterday’s gain, as six shares fell for each that gained. Automakers, mining and financial-services companies led the retreat. Bankia SA slid 4.8 percent in Madrid as El Confidencial said the Spanish government will nationalize the lender. Royal KPN NV rallied 17 percent as America Movil SAB (AMX), the wireless carrier owned by the world’s richest man, Carlos Slim, offered 2.6 billion euros ($3.4 billion) to increase its stake.

Euro Watch

The euro fell 0.3 percent versus the yen. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, climbed 0.1 percent, advancing for the seventh consecutive day in its longest rally since 2010. The so-called Aussie weakened against 12 of its 16 major peers after the nation reported a larger-than-estimated trade deficit.

Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation, according to John Taylor of hedge fund FX Concepts LLC.

“This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”

Commodities Retreat

Oil in New York declined 1.3 percent to $96.71 a barrel in New York, falling for a fifth day in its longest slump in three months, after Saudi Arabian Oil Minister Ali al-Naimi said prices are too high. Copper sank 2.5 percent to $3.6805 a pound as 19 of 24 commodities tracked by the S&P GSCI declined.

The MSCI Emerging Markets Index (MXEF) sank 1 percent as benchmark indexes in Mexico, India and Brazil lost at least 1.8 percent. The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong slid 0.5 percent as residential land sales dropped 92 percent in major Chinese cities.