Real, Won Rise Against Yen on China Expansion; Stocks Decline

High-yielding currencies rose against the yen, led by Brazil’s real and the Korean won, while emerging-market stocks fell as investors weighed accelerating economic growth in China against the outlook for earnings.

The yen declined against 14 of its 16 most-traded counterparts at 10:29 a.m. in London. The MSCI Emerging Markets Index dropped 1 percent, erasing this year’s gains. Futures on the Standard & Poor’s 500 Index were down 0.1 percent after the benchmark gauge for U.S. equities slipped yesterday from a 15- month high. The Athens Stock Exchange General Index slumped 2.5 percent to a nine-month low while the spread between Greek and German 10-year bonds widened to the most in more than a decade.

China’s economy grew 10.7 percent in the fourth quarter, the fastest pace since 2007, the statistics bureau in Beijing reported, fanning expectations the central bank will curb record loan growth to prevent the economy from overheating. President Barack Obama plans to limit the size and trading activities of financial institutions, just as banks are recovering from $1.7 trillion is losses and writedowns since the start of 2007.

“The numbers China is achieving are much stronger than previously expected and obviously there are risks of bubbles,” said Michael Ganske, head of emerging-markets research at Commerzbank AG in London. “We have seen a strong rally in equities across the board. The question is, is this sustainable?”

Earnings Setbacks

Morgan Stanley, the world’s biggest brokerage, yesterday said earnings from continuing operations were 14 cents per share, missing the average estimate of analysts surveyed by Bloomberg for 42 cents. Earlier this week, Aluminum Corp. of China said it may post a loss for 2009. Goldman Sachs Group Inc. is scheduled to report results before the U.S. market opens.

The South Korean won gained 0.5 percent against the yen and Brazil’s real advanced 0.4 percent as investors sold the Japanese currency for higher-yielding assets. The pound fell 0.4 percent against the euro, its first decline in eight days, after the government said the U.K. budget deficit widened last month.

The yield premium investors demand to hold Greek 10-year bonds instead of German bunds, Europe’s benchmark government securities, widened to more than 301 basis points, the highest since the euro’s introduction in 1999. The cost of insuring against losses on Greek government debt jumped to a record, according to CMA DataVision prices. Contracts rose 3.5 basis points to 353.5, meaning it costs $353,500 a year to insure $10 million of Greek debt for five years.

Dubai, India

The MSCI Emerging Market Financials gauge slid 1.1 percent to a four-week low, led by a 3.3 percent decline in Land & Houses Pcl, Thailand’s largest home builder. The DFM General Index of stocks in Dubai declined 1.1 percent to the lowest level in more than a month on concern banks will report a drop in earnings. India’s Sensitive Index slumped 2.4 percent, the most in more than two months, after a government index of food inflation stayed above 15 percent, adding pressure on the central bank to tighten monetary policy.

The MSCI Asia Pacific Index fell 0.4 percent. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. sank more than 1 percent in Hong Kong.

Europe’s Dow Jones Stoxx 600 Index declined 0.1 percent, after yesterday posting the biggest drop in six weeks. Enterprise Inns Plc, the U.K.’s second-biggest pub owner, led rising shares, surging 11 percent in London after saying the rate of decline in profit has slowed. National Bank of Greece SA, the nation’s biggest lender, slipped 4.7 percent in Athens. EFG Eurobank Ergasias SA, Greece’s second-largest bank, slumped 6.2 percent.

U.S. Futures

Futures indicated the S&P 500 may open lower. A government report may show the index of U.S. leading indicators rose in December for a ninth month, signaling the economy will keep growing through the first half of the year, and a separate report that may show Philadelphia-area manufacturing expanded for a fifth month.

More than 60 companies in the S&P 500 are reporting fourth- quarter results this week and analysts surveyed by Bloomberg forecast total earnings grew 67 percent, with estimates for a 30 percent increase in the first quarter of 2010. The benchmark index’s valuation climbed last week to 25 times its companies’ reported operating profits, the highest level since 2002, following a 70 percent jump since March.

Crude oil for March delivery fell 0.4 percent to $77.40 a barrel in New York trading. Gold for immediate delivery fell 0.4 percent to $1,106.25 an ounce in London. Copper for delivery in three months rose 0.2 percent to $7,390 a metric ton.