BLBG: European Stocks Drop With Asia as China Slump Boosts Euro, Gold
Oil pulls back after entering bull market in three-day surge
Stoxx Europe 600 drops after worst August in four years
European shares showed no sign of shaking off last month’s worst selloff since 2011 after Asian stocks dropped and a gauge of Chinese manufacturing fell to a three-year low. The yen and euro rallied with gold, while oil pulled back after entering a bull market.
Fresh from one of the most volatile trading periods since the global financial crisis, investors are scanning data for signs of China’s impact on the world economy. Factory gauges for Russia, Sweden and Poland all declined, and data showed falling consumer prices in Thailand and slowing inflation in Indonesia.
"The trend toward deceleration has become clear" in China, said Masaaki Yamaguchi, a Tokyo-based equity market strategist at Nomura Holdings Inc. "This isn’t particularly surprising, but the market continues to be very sensitive to the direction in China."
The Stoxx Europe 600 index declined 1.3 percent at 8:15 a.m. London time, after dropping 8.5 percent last month. The MSCI Asia Pacific Index slid 2.2 percent as Japan’s Topix index closed down 3.8 percent. Futures on the Standard & Poor’s 500 Index declined 1.4 percent following the measure’s 6.3 percent drop in August. U.S. oil retreated 2.6 percent in the wake of its three-day surge. The yen and euro both appreciated 0.5 percent while gold climbed 0.7 percent.
Factory Slowdown
The Shanghai Composite Index fell 1.2 percent as concern grew that government intervention to shore up equities will fail. The Chinese government’s manufacturing purchasing managers’ index dropped to 49.7 in August, its first time below 50 since February. The securities regulator said it will encourage listed companies to conduct mergers and acquisitions, buy back shares and pay higher cash dividends.
Germany’s DAX Index was among the biggest decliners in western Europe, sliding 1.7 percent as Bayer AG led the drop.
“The manufacturing index still shows that the economy is in the process of seeking a bottom,” said Wu Kan, a Shanghai-based fund manager at JK Life Insurance. “The market is unlikely to pick up anytime soon.”
Australia’s dollar was little changed at 71.11 U.S. cents after the central bank kept interest rates at a record-low 2 percent. The country’s 10-year bonds advanced, with yields falling three basis points to 2.64 percent.
U.S. Treasuries also pared some of Monday’s losses amid demand for haven assets. Ten-year yields declined three basis points to 2.19 percent after rising four basis points last session.
Risk Proxies
The yen, which typically moves the opposite way to Japanese stocks, climbed to 120.57 per dollar amid the Topix’s retreat. The index lost 7.4 percent in August, also its worst month since May 2012. The euro gained to $1.1268. The Chinese yuan strengthened 0.1 percent to 6.3709, after a loss of 2.6 percent last month.
“In the event of sustained yuan and equity-market weakness, the risk proxies and currencies most exposed to a weaker yuan, like commodity producers and export competitors, are most vulnerable,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “The safe havens will outperform,” like the yen and the euro, she said.
In the commodities market, oil swung to losses after rallying 28 percent over the past three days. West Texas Intermediate crude dropped to $47.73 a barrel, while Brent slipped 2.3 percent to $52.93. The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the world’s supply, said in a monthly publication that it is willing to talk about output issues. Data Wednesday is expected to show U.S. crude stockpiles expanded, according to a survey of energy analysts. Nickel tumbled 3.1 percent, while lead fell 0.6 percent.
