BLBG:Stocks Fall With Commodities on Fed as Treasuries Climb
Stocks fell to a five-week low and oil led declines in commodities on speculation the Federal Reserve will curb bond purchases next month. Indonesia’s rupiah traded at its weakest since 2009 while U.S. Treasuries advanced.
The MSCI All Country World Index lost 0.5 percent to 368.95 at 6:41 a.m. in New York, the lowest since July 11 on an intraday basis. The Stoxx Europe 600 Index slid 1 percent, with trading volume 29 percent more than the 30-day average. Standard & Poor’s 500 Index futures added less than 0.1 percent. Treasuries rose, pushing the 10-year yield down from a two-year high. Oil sank 0.5 percent in New York. The rupiah tumbled 1.9 percent per dollar to the lowest since April 2009.
Investors withdrew $8.4 billion from emerging-market exchange-traded funds this year amid a selloff that sent India’s rupee to a record low and Indonesian stocks down more than 19 percent from an all-time high three months ago, data compiled by Bloomberg show. Weakening economies from India to Indonesia are fueling pessimism in markets already concerned the Fed, which publishes minutes of its July meeting tomorrow, will start cutting bond purchases in September.
“The U.S. is going to unwind a historical amount of stimulus and it’s going to make markets nervous,” said Nader Naeimi, the head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney, which manages more than $130 billion. “In the next couple of months, until U.S. bond yields settle down, we’re going to see some choppy trades” in global equities, he said.
Benefits of more purchases “are likely to be negligible,” Richmond Fed President Jeffrey Lacker said in interview in Richmond Times-Dispatch newspaper on Aug. 18.
Cutting Outlook
Eight shares declined for every one that advanced in the Stoxx 600. CRH Plc (CRH) sank 6 percent, the most in four months, after the cement maker cut its second-half earnings guidance, citing weak demand from the euro region. HeidelbergCement AG lost 4 percent. John Wood Group Plc, a U.K. oil-services provider active in Africa and the Middle East, tumbled 6.8 percent after cutting the profit outlook at its engineering division.
Glencore Xstrata Plc dropped 2.6 percent in London trading after writing down $7.7 billion of assets acquired in the Xstrata Plc takeover three months ago. GSW Immobilien AG rallied 8.1 percent in Frankfurt after Deutsche Wohnen AG offered to buy Berlin’s biggest publicly traded residential landlord in an all-share transaction. Deutsche Wohnen fell 2.5 percent.
The decline in S&P 500 (SPX) futures indicated the U.S. equities gauge will extend a six-week low.
Emerging Markets
The MSCI Emerging Markets Index fell for a fourth day, losing 1.6 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 2.9 percent. Benchmark gauges in South Korea, Malaysia, Thailand and the Philippines dropped at least 1.5 percent.
The Jakarta Composite Index sank 3.2 percent, extending a four-day slide to 11 percent. Data showed yesterday that the current-account deficit widened to a record last quarter and a report indicated this month the economy grew less than 6 percent for the first time since 2010 in the second quarter.
The S&P GSCI (SPGSCI) gauge of 24 commodities fell 0.5 percent as West Texas Intermediate oil declined to $106.55 a barrel. Brent crude slid 0.4 percent to $109.44. Soybeans fell as much as 1.6 percent and corn dropped 1 percent on prospects for bigger crops this year.
Bonds Rally
The U.S. 10-year yield fell seven basis points, or 0.07 percentage point, to 2.81 percent, according to Bloomberg Bond Trader prices. The yield climbed to 2.90 percent yesterday, the highest level since July 2011.
Price swings as measured by the Merrill Lynch Option Volatility Estimate MOVE Index climbed to 99.48 yesterday, the highest level since July 9. The average for 2013 is 68.
The yen strengthened for the first time in three days against the dollar on increased demand for the relative safety of the Japanese currency. The yen appreciated 0.1 percent to 97.42 per dollar and weakened 0.3 percent per euro. The euro added 0.4 percent to $1.3395.
Australia’s dollar fell for a second day, following its biggest drop this month, after the Reserve Bank said the currency’s direction will be important in determining policy. New Zealand’s dollar tumbled after the country’s central bank chief said it will impose bank lending restrictions, reducing the need for interest-rate increases. Norway’s krone slid as a report showed the economy expanded less than analysts estimated in the second quarter.
Aussie Slides
Australia’s currency dropped 0.6 percent to 90.59 U.S. cents. New Zealand’s dollar slid 1 percent to 79.91 U.S. cents. The krone declined 0.9 percent per dollar.
The cost of insuring against losses on corporate bonds rose, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies increasing 1.1 basis points to 104.2 basis points, the highest since July 17.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jae Hur in Tokyo at jhur1@bloomberg.net;
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net
