London: Bonds rallied around the world for a second day and stocks declined on reports of slowing growth while Germany cut its borrowing needs.

German 10-year bond yields dropped 5 basis points to 2.3 per cent as of 10.23 am in London after falling 11 basis points on Wednesday, the biggest decline in a month. The Irish 10-year yield widened to a record 411 basis points over German bunds. The Stoxx Europe 600 Index lost 0.7 per cent to 259.32 points, retreating for a third day. Futures on the Standard & Poor's 500 Index fell 0.5 percent.

The euro snapped a three-day advance against the dollar, declining 0.4 per cent to $1.3348 (Dh4.90279).

Growth in Europe's services and manufacturing industries weakened more than economists forecast in September, dropping to 53.8 from 56.2, Markit Economics said yesterday. Germany, Europe's largest economy, will sell 60 billion euros of bonds and bills in the fourth quarter, 29 billion euros less than forecast in December, the Federal Finance Agency said. Portuguese, Italian and Spanish 10-year bond yields rose relative to similar-maturity benchmark German bunds. "The re-widening in spreads in Europe is increasing safe haven flows," said Mark Schofield, head of interest-rate strategy at Citigroup Global Markets Ltd. in London.

Treasury 10-year yields were 3 basis points lower at 2.53 per cent, near the lowest in three weeks. The cost of insuring Irish debt from default climbed to a record 495.5 basis points before a sale of as much 500 million euros of 2011 bills.

The Dollar Index, a measure of the currency against six trading partners, added 0.3 per cent to 80.036. The euro dropped 0.5 per cent to 112.7 yen, while the Japanese currency was little changed at 84.43 a dollar. The New Zealand dollar slipped versus all 16 of its major peers, losing 1.5 per cent against the yen.

New Zealand's currency weakened against all 16 of its major counterparts after second-quarter economic growth trailed economists' estimates.

New Zealand's gross domestic product increased 0.2 per cent, less than a third of 0.7 per cent pace forecast by economists.

More than four stocks fell for every one that gained on the Stoxx 600, while 18 out of 19 industries declined. Banks led the decline, as Credit Suisse Group AG tumbled 2.8 per cent and Banco Santander, Spain's largest lender, lost 1.3 per cent.

The decline in US futures indicated the S&P 500 may fall for a third day.