Published April 24. 2012 4:00AM
London - Stocks plunged worldwide and the euro weakened as Europe's backlash against budget cuts gained momentum, while commodities retreated as manufacturing shrank.
The Standard & Poor's 500 Index fell 0.8 percent at 4 p.m. New York time, trimming its drop from 1.4 percent. The Stoxx Europe 600 Index sank 2.3 percent to a three-month low as gauges for eight nations, including Sweden, Germany, France and the Netherlands decreased 2.5 percent or more. The euro lost 0.5 percent versus the dollar and 1 percent against the yen. The cost of insuring against a European sovereign default climbed to the highest level in four weeks. The S&P GSCI Index of 24 raw materials slumped 0.3 percent. Treasuries rose a fourth day.
Dutch Prime Minister Mark Rutte offered his cabinet's resignation amid a revolt against spending cuts. French President Nicolas Sarkozy lost the first round of his re- election bid as the anti-euro National Front won a record share of the vote. Euro-area services and manufacturing contracted more than estimated, while data indicated China's production will shrink for a sixth month.
"There's enough out there that can justify taking the market down," Mark Bronzo, who helps manage about $125 billion at Guggenheim Investments in Irvington, N.Y., said. "There's more work to be done in Europe, yet there's political and social pressure not to do more. The economic news was disappointing. In addition, we're digesting a big advance in the market."
Stocks fell after the S&P 500 rose 0.6 percent between April 13 and April 20, ending a two-week losing streak. The benchmark measure of U.S. shares had rallied 25 percent since Oct. 3. The Stoxx Europe 600 advanced 1.7 percent last week, rising for the first time in five weeks.
The yield on Germany's five-year bond fell to a euro-era low of 0.60 percent. The cost of credit-default swaps on Dutch government debt climbed 11.5 basis points to 130, the highest in five months, as opposition to austerity in the traditionally budget-conscious nation propelled Rutte's coalition toward an early breakup.
France's CAC 40 stock index slumped 2.8 percent after Sarkozy trailed Francois Hollande in the first round of his re-election attempt, while Marine le Pen's National Front won 20 percent of the vote.
"Politics will undoubtedly provide the pepper in this week's financial melting pot," said Bill Blain, co-head of the special situations group at Newedge Group in London. "A turnover in the Dutch government, and the inevitable swing toward more skeptical anti-Europe politics could well generate increased uncertainty."
Euro-area services and manufacturing declined, according to a Market Economics index that fell to a five-month low of 47.4. Economists in a Bloomberg survey projected an increase to 49.3, the median forecast. HSBC Holdings and Markit reported a preliminary reading of 49.1 for their China purchasing managers' index, compared with a final 48.3 in March. Readings of less than 50 indicate contraction in both reports.
The Stoxx Europe 600 Index dropped the most since April 10 as all 19 industries retreated. ING Groep, the largest Dutch financial-services company, and The Hague-based Aegon sank more than 6 percent. Rio Tinto and BHP Billiton led mining shares lower, falling at least 3.6 percent.
Royal Philips Electronics was the only company in the AEX index of Dutch stocks to advance after the world's biggest light-bulb maker reported profit that beat analysts' estimates. Sweden's OMX Stockholm 30 Index plunged 4.6 percent, the most among developed-market gauges worldwide, driven lower by declines exceeding 4.5 percent in Hennes & Mauritz and Nordea Bank.
The Dollar Index gained 0.2 percent as the euro weakened. Treasuries gained, driving yields on 10-year notes down three basis points to 1.93 percent. The yield on the 30-year bond dropped to the lowest in almost seven weeks before the Federal Open Market Committee begins a two-day meeting Tuesday to set monetary policy.
Oil dropped 0.7 percent in New York, slipping from the highest closing price in three days.