Aug. 11, 2010 (Bloomberg) -- Stocks plunged, sending the MSCI World Index to its biggest drop since June, and Treasuries led a rally in government bonds on concern that the U.S. economic recovery is faltering. The dollar surged the most in three months against the euro.
The MCSI global index slid 2.7 percent, the biggest decline since June 29. The Standard & Poor’s 500 Index sank 2.6 percent to 1,092.17 at 12:21 p.m. in New York. The Stoxx Europe 600 Index retreated 2 percent. The two-year Treasury yield fell as much as three basis points to a record low 0.4892 percent. Gilts extended gains after the Bank of England cut its forecast for growth. The greenback strengthened 2.1 percent, the most on an intraday basis since May 6, to $1.2900 per euro.
The Federal Reserve’s statement yesterday that the recovery is weakening and would require fresh stimulus was followed by an announcement that China’s industrial output rose the least in 11 months, adding to signs that the world’s third-biggest economy is slowing. The selloff today halted a monthlong rally in stocks that restored almost $4 trillion to global equity markets between July 5 and yesterday.
“We’re in a worldwide soft patch and investors wonder why the Fed didn’t do more,” said James Swanson, chief investment strategist at Boston-based MFS Investment Management, which oversees about $197 billion. “People are dumping stocks because they’re afraid earnings will decelerate and the economy is losing steam.”
