May5 (Bloomberg) -- Stocks fell, extending the biggest slump in global equities in three months, oil dropped and the euro traded below $1.30 on concern Europe’s debt crisis is
spreading. Standard & Poor’s 500 Index futures declined.

The MSCI Asia Pacific excluding Japan Index dropped 1.9 percent to 410.44 as of 3:55 p.m. in Hong Kong. The extra yield investors demand to own company debt instead of U.S. Treasuries
rose the most in 13 months as investors shunned higher-yielding
assets. The Stoxx Europe 600 Index fell 0.9 percent while S&P
futures retreated 0.4 percent.

“Investors have clearly shifted their focus from strengthening corporate earnings and an improving macroeconomic backdrop to the problem of sovereign debt,” said Nader Naeimi,
a strategist at AMP Capital Investors Ltd. who helps oversee $90
billion for the Sydney-based mutual-funds manager.

More than $1.1 trillion was wiped from the value of global stocks yesterday amid growing expectations that the 110 billion euro ($143 billion) rescue package for Greece will need to be
extended to Spain and Portugal. Stocks declines accelerated
after Spanish Prime Minister Jose Luis Rodriguez Zapatero called
the speculation “complete madness.”

Spain’s IBEX 35 index slumped 2.8 percent and Portugal’s PSI-20 Index tumbled 3.8 percent, leading declines in European stocks. The MSCI World Index of 23 developed nations dropped 0.6
percent after losing 2.6 percent yesterday, the most since Feb.
4, erasing this year’s gains. The MSCI gauge for emerging
markets fell 1.5 percent and is now down 1.4 percent for 2010.

The S&P 500 Index dropped 2.4 percent yesterday.

Contagion ‘Sword’

All 10 of the industry groups in the MSCI Asia index declined, with more than 10 stocks falling for each that gained. Taiwan’s Taiex lost 3 percent. Markets in Japan, South Korea and
Thailand are closed today.

“There is no dispute that risk appetite has come right off with the European worries,” said Prasad Patkar, who helps manage $1.7 billion at Platypus Asset Management Ltd. in Sydney.
“Damage caused by contagion is so firmly etched in people’s
mind from the dark days of the financial crisis that no one
wants to be caught long risk whilst this sword is hanging over
our heads.”

Westpac Banking Corp., Australia’s second-biggest bank, dropped 4.2 percent to A$26.19 in Sydney even after saying first-half net income climbed 32 percent to A$2.88 billion ($2.6
billion).

“We’ll be living with the effects and the consequences of this crisis for many years to come,” said Westpac Chief Executive Officer Gail Kelly.

Australian Bonds

The euro traded below $1.30 for a second day, near the weakest level since April 2009, before Chancellor Angela Merkel speaks to parliament on the bailout. Her coalition has stepped
up calls for allowing the “orderly” default of region members
burdened with debt to avoid a repeat of the Greek crisis.

The euro declined to $1.2947 as of 9:02 a.m. in London, from $1.2987 in New York yesterday, after dropping to $1.2935. The currency was at 122.50 yen from 122.78 yen. The 16-nation
currency fell for a third day against the pound, losing 0.2
percent to 85.58 pence.

“The outlook for the euro remains bearish,” said Elsa Lignos, a strategist at Royal Bank of Canada in London. “It’s still an overvalued currency and that’s hard to justify, given
the internal problems in the euro zone.”

Yields on Australian bonds declined as investors sought the safety of sovereign debt outside Europe, with rates on 10-year notes dropping 10 basis points to 5.65 percent. Treasury futures
were near the highest level since February after U.S. government
securities rallied the most in a week yesterday. Ten-year yields
fell nine basis points to 3.61 percent in New York.

Corporate bond spreads widened 4 basis points to 153 basis points, Bank of America Merrill Lynch’s Global Broad Market Corporate Index shows, the biggest increase since March 2009.
The cost of protecting corporate bonds from default surged in
Australia and Asia.

Spanish Debt

The Markit iTraxx Australia index of credit-default swaps jumped 15 basis points to 100 basis points as of 5:05 p.m. in Sydney, its biggest one-day increase since June 23, according to
prices from Nomura Holdings Inc. and CMA DataVision in New York.
That would be the highest closing level since Feb. 16, the
prices show. A basis point is 0.01 percentage point.

The extra yield investors demand to hold Spanish debt rather than German equivalents widened to 116 basis points this week from 101 basis points on April 30 as the European Union’s
rescue plan for Greece failed to insulate other euro-area
nations. Even as Spain’s debt burden, at 53 percent of output,
is lower than the EU average, its budget deficit is the euro
region’s third-largest.

S&P last week cut Greece’s credit rating to the junk level of BB+, lowered Spain by one level to AA and cut Portugal by two steps to A-.

Philippine Slump

Crude oil dropped for a second day, after it plunged the most in three months yesterday, to trade at $82.17 a barrel. Copper for three-month delivery fell 0.4 percent to $7,001 per
metric ton after plunging 5.4 percent yesterday, the biggest
drop since Jan. 27, 2009.

Philippine bonds, stocks and the peso fell after vote- counting machines malfunctioned in tests this week, raising concern there will be a delay in choosing a new leader to
replace President Gloria Arroyo.

Philippine bonds, stocks and the peso slumped after vote- counting machines malfunctioned in tests this week, raising concern there will be a delay in choosing a new leader to
replace President Gloria Arroyo.

The Philippine Stock Index tumbled 3.5 percent in Manila, the biggest drop since June. The peso fell 0.8 percent to 45.01 against the U.S. dollar. The yield on the 6.5 percent dollar-
denominated bonds due January 2020 jumped 13 basis points to
5.411, the biggest rise in yields since Feb. 5, at 12:59 p.m.
according to prices from ING Groep NV.