Stocks Fall Around World on China, Ericsson as Dollar Rallies |

By Daniel Hauck

Oct. 22 (Bloomberg) -- Stocks fell from Tokyo to Paris and the dollar rose as the fastest economic growth in a year in China stoked speculation that government stimulus measures will be removed, while European earnings disappointed investors.

The Shanghai Composite Index fell the most this month and the MSCI World Index of 23 developed countries slid for a third day, losing 0.7 percent at 10:09 a.m. in London. Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The dollar strengthened against all 16 most-traded currencies tracked by Bloomberg. Crude oil sank from a one-year high in New York.

China’s economy grew 8.9 percent in the third quarter, the fastest pace in a year, after $586 billion in stimulus spending. Inflation expectations are increasing, statistics bureau spokesman Li Xiaochao said at a briefing in Beijing today. Ericsson AB, the world’s biggest maker of mobile-phone networks, announced third-quarter profit that trailed analysts’ estimates, after 77 percent of companies in the MSCI World beat projections.

“Countries including China may withdraw stimulus,” Peter Westin, chief strategist at Moscow-based Aton LLC, said in an interview. “This will reduce liquidity, which is the main driver for global markets this year.”

Europe’s Dow Jones Stoxx 600 Index slid 1.7 percent, the biggest drop in almost three weeks, as all 19 industry groups except food and beverage companies declined.

Ericsson, Credit Suisse

Ericsson slumped 8 percent in Stockholm after the company said third-quarter net income slid 71 percent to 810 million kronor ($118 million) as clients slashed spending. Analysts had estimated profit of 1.97 billion kronor in a Bloomberg survey.

Credit Suisse Group AG dropped 2.8 percent in Zurich as Switzerland’s biggest bank by market value reported third- quarter profit that disappointed some investors.

U.S. futures indicated that the S&P 500 may retreat for a third straight day. The index tumbled in the final hour of trading yesterday after analyst Dick Bove at Rochdale Securities downgraded Wells Fargo & Co., erasing a rally spurred by better- than-estimated results at Morgan Stanley and Yahoo! Inc.

The S&P 500 is trading at its highest valuation in five years after climbing 60 percent from a 12-year low in March as the government lent, spent or guaranteed $11.6 trillion to combat the worst recession since the 1930s. Worldwide, governments from Beijing to Berlin spent $12 trillion to help end the global contraction, according to International Monetary Fund data.

The Shanghai Composite dropped 0.6 percent, the steepest decline since Sept. 28.

‘Sweet Spot’

“It is clear that time is running out for the sweet spot,” Lee Hardman, a currency economist at Bank of Tokyo Mitsubishi UFJ Ltd. in London, wrote in an e-mailed note today. Following today’s GDP release in China, “market sentiment has been soured as the report has turned attention towards when the Chinese will begin to tighten policy,” he said.

The MSCI Emerging Markets Index slid 1.1 percent, led by a 2.3 percent slump in Russia’s Micex Index as oil producers OAO Lukoil and OAO Rosneft slid.

The dollar climbed as much as 0.7 percent versus the yen and 0.4 percent against the euro, sending the Dollar Index as much as 0.7 percent higher. The pound declined as much as 0.6 percent against the U.S. currency after a report showed British retail sales unexpectedly stagnated in September.

Crude oil for December delivery fell as much as 1 percent to $80.55 a barrel in New York trading, retreating from $81.37 yesterday. Copper for delivery in three months dropped 0.7 percent to $6,545 a metric ton in London, gold for immediate delivery slipped 0.4 percent to $1,055.10 an ounce and wheat declined 1.2 percent to $5.3625 a bushel in Chicago.

To contact the reporters on this story: Daniel Hauck in London at dhauck1@bloomberg.net.

Last Updated: October 22, 2009 05:27 EDT