Oil tumbled as Saudi Arabia cut the cost of its crude to the U.S., deepening a selloff that sent prices to a three-year low. Bonds advanced, while U.S.-equity index futures pared declines. West Texas Intermediate crude slid 2.8 percent to $76.56 a barrel at 7:28 a.m. in New York, after reaching $75.84. The yield on 10-year German bunds fell four basis points to 0.82 percent and the rate on Treasuries dropped two basis points to 2.32 percent. Standard & Poor’s 500 Index futures declined 0.2 percent and the Stoxx Europe 600 Index swung between gains and losses percent. Japan’s Topix index jumped 2.6 percent to a six-year high. Oil prices fell into a bear market last month as global demand growth slowed and supplies swelled from producers outside OPEC, with the U.S. pumping at the fastest pace in more than three decades. Declining commodity prices are contributing to slower inflation around the world, helping preserve the value of fixed payments on bonds. “The focus for OPEC is really the U.S. market where the biggest source of new supply is coming from,� Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e-mail. For consumers, “the continued fall in oil prices has become an early Christmas present,� he said. Americans go to the ballot box today in midterm elections that can swing control of Congress. Alibaba Group Holding Ltd. gained in early New York trading after reporting earnings. WTI fell as much as 3.7 percent to the lowest price since October 2011. Brent for December settlement declined as much as 3.2 percent to $82.08 a barrel on the London-based ICE Futures Europe exchange. State-owned producer Saudi Arabian Oil Co., or Saudi Aramco, lowered the premium for Arab Light relative to U.S. Gulf Coast to the least since December. Inflation Outlook Treasuries show inflation expectations are falling in 2014 by the most in three years. The difference between yields on 30-year debt and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices, was at 2.08 percentage points today. The spread has shrunk 27 basis points in 2014, the most since 2011, and declined to 1.99 percentage points last month, the least in three years. Bill Gross, in his second investment outlook since joining Janus Capital Group Inc., said deflation is a “growing possibility� as governments worldwide struggle to stimulate their economies. The European Commission cut its growth forecast for the euro area and said inflation will be even weaker than the European Central Bank predicts. The yield on Ireland’s 10-year note declined three basis points to 1.75 percent as the nation was said to begin a sale of 15-year securities via banks. Apple Inc. is selling its first bonds in euros as the iPhone maker seeks to fund another round of shareholder rewards without using overseas cash that would be subject to U.S. repatriation taxes. Oil Stocks Oil companies were the worst performers among 19 industry groups in the Stoxx 600. Total SA, BP Plc and Royal Dutch Shell Plc each lost at least 2 percent. Hugo Boss AG fell 6 percent, posting the biggest decline in the gauge, after lowering its full-year targets for sales and operating profit. The fashion company cited a slowdown in European demand. Alibaba Group rose 3.9 percent after adjusted earnings per share topped analyst estimates. The MSCI Emerging Markets Index fell for a second day, slipping 0.3 percent, led by commodity producers and technology shares. Saudi Arabia’s benchmark index dropped 3.6 percent, the most in more than two weeks. A gauge of Russian company securities trading in London fell for a second day, dropping 1.5 percent. The yield on the government’s September 2023 dollar bond rose 10 basis points to 5.06 percent. Markets in Russia were closed for a public holiday. Ukraine’s July 2017 Eurobond declined, sending the yield 35 basis points higher to 14.42 percent, extending yesterday’s 68 basis-point increase. President Petro Poroshenko will convene a meeting of the National Security and Defense Council at 5 p.m. today to consider revoking the “special status� law that was part of the truce accord struck Sept. 5 in the Belarus capital, Minsk. China Fund The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong gained 0.6 percent, while the Shanghai Composite Index was little changed. China plans a $16.3 billion fund to finance construction of infrastructure linking domestic and overseas markets, according to government officials who participated in drafting the plan. Japan’s 30-year bond yield tumbled 16 basis points to 1.44 percent, reaching a level unseen since April 2013. The yen strengthened 0.6 percent to 113.38 per dollar after tumbling 2.8 percent on Oct. 31 and another 1.5 percent yesterday. The Bloomberg Dollar Spot Index slipped 0.1 percent after closing at the highest level since April 2009 yesterday. The euro climbed 0.3 percent to $1.2518. The Australian dollar strengthened 0.7 percent to 87.40 U.S. cents even as the central bank held rates steady and said the currency remains above most estimates of its fundamental value. The cost of insuring corporate debt was little changed. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies declined 0.75 basis point to 65 basis points, while the region’s high-yield benchmark fell one basis point to 358 basis points. To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net To contact the editors responsible for this story: Stephen Kirkland at skirkland@bloomberg.net; Stuart Wallace at swallace6@bloomberg.net Claudia Carpenter

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