BLBG:Stocks, Commodities Drop on China Manufacturing
Stocks (MXAP) and industrial metals fell as manufacturing shrank in Europe and China. The euro weakened and the cost of insuring the region’s debt rose after the Dutch government split and French President Nicolas Sarkozy lost ground in elections.
The MSCI All-Country World Index (MXWD) slid 0.7 percent at 11:08 a.m. in London as an index of Dutch stocks sank to a four-month low. Standard & Poor’s 500 Index futures dropped 1 percent. Copper, zinc and lead declined at least 1.4 percent. The euro weakened 0.5 percent versus the dollar and the yen strengthened against all 16 of its most-traded peers. The cost of insuring European sovereign debt jumped to the highest in more than a month. The extra yield investors demand to hold Dutch 10-year bonds over German bunds rose to a three-year high.
Euro-area services and manufacturing declined more than estimated in April while data indicated China’s production will contract for a sixth month. Sarkozy’s hopes of a second term rest on winning over voters from the anti-euro National Front before the final round of elections. Dutch Prime Minister Mark Rutte failed to reach an agreement with a coalition party over austerity measures.
“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 Ltd. in London. “A turnover in the Dutch government, and the inevitable swing toward more skeptical anti-Europe politics could well generate increased uncertainty.”
Dutch Politics
The Stoxx Europe 600 Index (SXXP) dropped the most in more than a week as all 19 industry groups retreated. ING Groep NV, the largest Dutch financial-services company, tumbled 7.2 percent and Aegon NV, an insurer based in The Hague, sank 9.6 percent. Rio Tinto Group and BHP Billiton Ltd. led mining companies lower, falling more than 2.5 percent. Royal Philips Electronics NV was the only stock in the 25-member AEX index to advance after the world’s biggest light-bulb maker reported profit that beat analysts’ estimates.
The Dutch 10-year yield jumped as much as 11 basis points to 2.43 percent, driving the yield gap with bunds to the most since March 2009, while the cost of credit-default swaps on Dutch government debt climbed 6 basis points to 125, the highest level since Jan. 9.
Rutte will meet today with his cabinet to discuss how to pass a budget that meets European Union targets before calling early elections after one of the parties in his minority coalition withdrew. The cabinet will aim to find a majority for measures to bring the deficit to 3 percent of gross domestic product, Stef Blok, who leads Rutte’s Liberal Party in parliament, said yesterday.
U.S. Futures
The drop in S&P 500 futures indicated the benchmark U.S. equities gauge will erase last week’s 0.6 percent advance. Eleven companies in the index are due to report earnings today, including Xerox Corp. and ConocoPhillips. Of the 94 S&P 500 members to have posted results since April 10, 80 have beaten analyst estimates for per-share profit, according to data compiled by Bloomberg.
Copper lost 1.8 percent to $8,048 a metric ton on the London Metal Exchange. Hedge funds cut their bets on higher commodity prices by the most in four months on mounting concern that Europe’s debt crisis will derail global growth. Money managers lowered net-long positions across 18 U.S. futures and options by 11 percent to 898,022 contracts in the week ended April 17, the most since Dec. 20, data from the Commodity Futures Trading Commission show.
Purchasing Managers
HSBC Holdings Plc and Markit Economics reported a preliminary reading of 49.1 for their China purchasing managers’ index, compared with a final 48.3 in March. A reading below 50 indicates contraction. A euro-area index based on a survey of purchasing managers in manufacturing and services fell to 47.4, a five-month low, from 49.1 in March, Markit Economics said in an initial estimate. Economists had forecast an increase to 49.3, according to the median of 17 estimates in a survey.
The euro slumped 1.1 percent against the yen, snapping a four-day increase, after the anti-immigrant National Front’s candidate won a record 18.1 percent in French presidential elections. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, rose 0.3 percent.
“There is plenty of risk in the French election,” leading to buying of the yen, said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed 3.5 basis points to 284.5. The cost of insuring French government debt rose to the highest in more than three months with credit-default swaps linked to the nation’s debt adding five basis points to 204.5.
Bond Yields
The French two-year note yield gained four basis points. The yield on Spain’s similar-maturity security jumped eight basis points and Italy’s advanced six basis points, with the German bund yield falling two basis points to 1.69 percent.
The 10-year U.S. Treasury yield fell three basis points, falling for the fourth consecutive day, with the 30-year yield also three basis points lower.
Japan’s 10-year bond yield declined as much as 1.5 basis points to 0.915 percent, the lowest level in 17 months. A basis point is 0.01 percentage point.
The Shanghai Composite Index slid 0.8 percent and the Hang Seng China Enterprises Index dropped 1.8 percent. The MSCI Asia Pacific Index lost 0.5 percent for a third day of losses. The Nikkei 225 Stock Average slipped 0.2 percent. South Korea’s Kospi index dropped 0.1 percent and Australia’s S&P/ASX 200 Index fell 0.3 percent.
The MSCI Emerging Markets Index (MXEF) lost 0.8 percent, bound for its third consecutive drop and its lowest level since Jan. 30. The Hang Seng China Enterprise Index (HSCEI) of mainland companies in Hong Kong slid 2.2 percent, the most since March 6. The PX Index (PX) retreated 0.8 percent in Prague after the Czech Republic’s governing coalition broke up over Cabinet personnel decisions and trimming the deficit to meet an EU target. The Micex Index fell 1.2 percent in Moscow and the FTSE/JSE Africa All Shares Index (JALSH) slipped 0.8 percent.
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Rob Verdonck in London at rverdonck@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
