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Asian stocks dropped ahead of a European summit on the region’s sovereign debt crisis, and after economic data from Japan and Australia signaled the global economy is slowing.
Pressure on Europe’s leaders to halt the spread of the region’s debt crisis at a summit in Brussels this week intensified as the European Union had its AAA long-term rating put on “creditwatch negative” by S&P following a similar action on 15 euro-area governments.
German Chancellor Angela Merkel and French President Nicolas Sarkozy are expected to argue for rewriting European Union treaties to tighten control of national budgets at the meeting of euro zone leaders tonight and tomorrow.
Tokyo Electric Power dropped 11% after the Mainichi newspaper said the government’s Nuclear Damage Liability Facilitation Fund may buy preferred shares worth at least 1 trillion yen ($12.9 billion) from the utility by next summer, without saying where the information came from.
European stocks dropped as the European Central Bank damped speculation it would step up purchases of government bonds and regulators said lenders need to raise more capital than previously forecast.
National benchmark indexes dropped in all of the 17 western European markets that were open today, except Iceland.
The ECB cut interest rates by 25 basis points, or a quarter percentage point, to 1 percent today, matching a record low. It introduced new three-year loans for banks and loosened the collateral criteria it imposes when lending by making credit claims such as bank loans eligible and reducing the rating threshold on asset-backed securities.
Stocks fell as ECB President Mario Draghi said he did not necessarily signal that the central bank would step up government bond purchases when speaking before lawmakers in Brussels last week. He said he was “kind of surprised by the implicit meaning” that was given to his comments when he said the ECB could follow faster fiscal union with “other elements.”
Banks declined, with Commerzbank and Deutsche Bank AG losing 9.5% and 4.3% respectively. Italy’s Intesa Sanpaolo plummeted 8.9%.
Peugeot slumped 7.3% as Thierry Huon, an analyst at Exane BNP Paribas (BNP) SA, cut the French carmaker to “neutral” from “outperform.”
U.S. stocks fell, snapping a three- day rally, as the European Central Bank damped speculation it would boost debt purchases and regulators said the region’s lenders need to raise more capital than previously estimated.
US stocks extended losses in late trading after news Germany rejected some draft measures for the euro zone crisis.
European Commission President Jose Barroso urged government leaders to set aside differences and strike a deal for more fiscal discipline at a European Union summit starting today. In the U.S, data showed that fewer Americans than forecast filed applications for unemployment benefits last week, reflecting a drop in firings that may signal the job market is on the mend.
All groups in the S&P 500 declined as financial shares tumbled 3 per cent as a group.
McDonald's Corp. rallied 0.7%. The world's largest restaurant chain said sales at stores open at least 13 months rose 7.4 per cent globally last month, driven by demand in Japan and China.
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