BLBG: Global Stocks Drop With Commodities on China Growth
Shares fell around the world and commodities tumbled to a five-year low amid speculation China will accept slower growth. Bonds rose after officials from the world’s biggest economies warned of rising financial risks.
The MSCI All-Country World Index slid 0.2 percent at 6:48 a.m. in New York. The Stoxx Europe 600 Index fell 0.4 percent and Standard & Poor’s 500 Index futures lost 0.3 percent. French and U.K. government bonds gained the most in Europe and the rand led currencies of commodity-producing nations lower. Silver retreated to the lowest level since July 2010.
China’s Finance Minister Lou Jiwei said growth in Asia’s largest economy faces downward pressure and reiterated that there won’t be major changes in policy in response to individual economic indicators. Group of 20 finance chiefs and central bankers said low interest rates could lead to a potential increase in financial-market risk, as major economies rely on monetary stimulus to bolster uneven growth. U.S. housing data is scheduled for today.
“It looks like the Chinese government recognizes that the economic boom is over,” said Andrea Williams, who helps oversee 50 billion pounds ($82 billion) of investments as head of European equities at Royal London Asset Management Ltd in London. “The country is settling down to a lower level of growth.”
Chinese Economy
The MSCI Emerging Markets Index slid 0.8 percent, extending its second week of declines to a six-week low. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong fell 1.7 percent to a two-month low.
A private gauge of Chinese manufacturing probably dropped for a second month in September, economists in a Bloomberg survey said before a report tomorrow. Data last week showed foreign direct investments decreased to a four-year low and home prices fell in all but two cities tracked by authorities.
China’s economy is growing in a stable way and operating within a reasonable range, Finance Minister Lou said in a statement published on the People’s Bank of China website. Macroeconomic policy will focus on “comprehensive” targets, particularly job growth and price stability, according to the statement.
Lou “gave a real hint that the recent policy easing may actually be quite limited,” Stuart Beavis, head of institutional equity derivatives at Vantage Capital Markets in Hong Kong, said by phone. “We’re not just going to see this wall of money thrown at the Chinese slowdown.”
The won strengthened 0.4 percent, the steepest gain since Aug. 22, after S&P raised South Korea’s outlook to positive from stable. The MSCI AC Asia Pacific Index (MXAP) fell 0.8 percent, heading for its lowest close since June.
Commodity Index
The Bloomberg Commodity Index (BCOM) dropped as much as 0.7 percent to 118.6154, the lowest since July 2009. Copper retreated 1.4 percent to $6,740.50 a metric ton and Brent crude fell 0.8 percent to $97.65 a barrel.
Silver declined as much as 2.7 percent to $17.3491 an ounce and iron ore slipped to $79.48 a ton, the lowest since futures began in Singapore in April 2013. Commodities are 12 percent lower this quarter, heading for the biggest such loss since the financial crisis in 2008. China is the largest consumer of energy and buyer of industrial metals.
The Stoxx 600 declined after closing last week 0.3 percent away from a six-year high reached in June. Commodities producers fell the most among 19 industry groups. The volume of Stoxx 600 shares changing hands today was 15 percent greater than the 30-day average, according to data compiled by Bloomberg.
Tesco slumped to its lowest since 2003 as it started an investigation into accounting practices after a profit overstatement. The U.K.’s biggest supermarket chain’s bond risk surged, with credit-default swaps jumping as much as 20 basis points to 111 basis points, according to data compiled by Bloomberg.
Sulzer AG fell 2.9 percent after saying merger talks with Dresser-Rand Group Inc. are over. Siemens AG agreed to buy the maker of compressors and turbines for the oil-and-gas industry. Cermaq ASA jumped 15 percent after Mitsubishi Corp. offered to buy it. Sigma-Aldrich Corp. jumped 17 percent in early New York trading after Merck KGaA agreed to buy it.
Home Sales
Futures (SPX) on the S&P 500 expiring in December fell after the index climbed for the sixth week in seven. A report may show that existing home sales in the U.S. rose in August to a 5.2 million annualized pace, according to economist forecasts before the National Association of Realtors releases the data at 10 a.m. in Washington.
Russia’s Micex fell for a fourth day, sliding 0.5 percent. Stocks are headed for the longest run of losses after the arrest of AFK Sistema’s billionaire owner Vladimir Evtushenko. The case against Evtushenkov stems from a probe into OAO Bashneft, an oil producer that his holding company Sistema acquired in 2009, the Investigative Committee said on Sept. 16. Sistema dropped 2.1 percent and Bashneft retreated 2.2 percent.
Commodity Currencies
Gains in French government bonds sent the 10-year yield three basis points lower to 1.36 percent, while the rate on similar-maturity U.K. debt fell three basis points to 2.51 percent. Yields on 10-year U.S. Treasuries were little changed at 2.57 percent after dropping four basis points last week. The rate on similar maturity Japanese notes declined two basis points to 0.53 percent.
The Fed will keep interest rates near zero for a “considerable time” after asset purchases are completed, most likely next month, it said last week as officials raised their median estimate for the federal funds rate at the end of 2015.
G-20 officials said yesterday in a communique released in Cairns, Australia, that they “are mindful of the potential for a build-up of excessive risk in financial markets, particularly in an environment of low interest rates and low asset price volatility.” The ministers welcomed signs of strength some key economies while noting “growth in the global economy is uneven.”
The rand dropped against all but one of its 16 major counterparts, depreciating as much as 0.6 percent to 11.1505 per dollar, the weakest level since Feb. 11. Australia’s dollar touched 88.65 U.S. cents, also the weakest since February.
To contact the reporters on this story: James Herron in London at jherron9@bloomberg.net; Nick Gentle in Hong Kong at ngentle2@bloomberg.net
To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net Sarah McDonald
