BLBG: European Stocks Erase Drop as Metals Decline on Growth Concern
Emerging-market currencies extend gains before Fed meeting
Yen gains as BOJ refrains from adding to stimulus efforts
European stocks and U.S. equity index futures erased declines, while metals fell on concern China’s slowdown will imperil global growth.
Copper fell for a third day as a report showed German investor confidence deteriorated more than analysts forecast and Australia’s central bank said China’s slowing economy was a risk to the global outlook. Meanwhile, the Shanghai Composite Index capped its biggest two-day slide in three weeks.
Developing-nation currencies gained for a sixth day as futures markets held to bets the Federal Reserve will keep interest rates unchanged this week. Odds of an interest rate increase this week were 30 percent, down from more than 50 percent before China roiled markets with its surprise currency devaluation last month. Futures signaled U.S. stocks will extend declines on Monday.
“We will see a rather tough market because nobody will position before the Fed decides,” said Alessandro Bee, strategist at Bank J Safra Sarasin Ltd. in Zurich. “If the Fed does raise rates it could be seen as a negative because of the timing.”
Stocks
The Stoxx Europe 600 Index added 0.2 percent at 6:37 a.m. in New York, after losing as much as 0.6 percent. E-mini futures on the Standard & Poor’s 500 Index expiring in December were little changed after the gauge fell for the first time in three days on Monday.
The recent turbulence in markets heralds a new era of increased volatility, according to hedge fund 36 South Capital Advisors, which called the August rout. While calm normally prevails before the Federal Reserve moves on interest rates, this time stock swings reign. If the central bank raises rates this week, it would be the first time since 1946 it will have done so within a month of a correction.
The Shanghai Composite dropped 3.5 percent to extend Monday’s 2.7 percent decline. The benchmark gauge has tumbled 42 percent from its June high to erase $5 trillion in value on mainland bourses. Hong Kong shares swung between gains and losses before closing 0.3 percent lower on Tuesday.
(For more news on stocks, see TOP STK.)
Currencies
The yen climbed 0.5 percent to 119.63 per dollar. Eleven of 35 economists surveyed by Bloomberg saw the Bank of Japan stepping up easing in October, while two forecast a move as early as today as the nation’s economy fails to gather momentum.
The Australian dollar slipped as much as 0.5 percent before trading 0.1 percent lower. RBA noted China’s currency depreciation in August and said Chinese authorities had for some time been selling foreign exchange reserves to stem losses in the yuan. It wasn’t clear which assets China sold or which were bought by those taking capital out, “but given the potential size of these flows, their effects on asset markets could be large.”
The Bloomberg Dollar Spot Index slipped 0.1 percent.
Russia’s ruble and South Africa’s rand led gains in developing nations, with a gauge of 20 currencies adding 0.1 percent. The ruble advanced 0.7 percent as oil rose, while the rand climbed 0.4 percent after the country’s current-account gap narrowed to a four-year low.
(For more news on currencies, see TOP FX.)
Commodities
Industrial metals extended losses after reports showed weak industrial output and fixed-asset investment in China, the world’s largest consumer of metals. Copper dropped 0.7 percent, while zinc fell 1.9 percent and nickel declined 0.9 percent.
Gold fell 0.2 percent to $1,107.10 an ounce, holding above a one-month low reached on Sept. 11 before the Federal Reserve decision on monetary policy.
Oil rebounded from two days of declines. West Texas Intermediate crude gained 0.8 percent to $44.36 a barrel while Brent rose 0.2 percent to $46.48.
The Organization of Petroleum Exporting Countries cut 2016 estimates for oil production outside the group by 110,000 barrels a day Monday. The group still sees non-OPEC supply expanding slightly next year, while the International Energy Agency on Sept. 11 predicted a contraction of 500,000 barrels a day, the biggest since 1992 as low prices take their toll on U.S. shale oil producers.
U.S. natural gas was poised for the longest run of daily gains in four months on forecasts for unusually warm fall weather in the eastern half of the U.S., which could spur additional demand for electricity for cooling. Futures advanced 0.2 percent to $2.764 per million British thermal units.
