BS: European, Asian Stocks Decline After Selloff Halts Rally
European shares dropped with Asian stocks (MXAP) amid a global selloff that halted a five-month rally in world equities. Crude oil fell while measures of credit risk rose as the dollar climbed against emerging-market currencies.
The Stoxx Europe 600 Index slipped 0.4 percent by 8:13 a.m. in London, extending yesterday’s 1.3 percent drop. The MSCI Asia Pacific Index slipped 1 percent. Standard & Poor’s 500 Index futures (DJA) added 0.1 percent following a 2 percent tumble that wiped out the U.S. gauge’s July gain. The dollar strengthened against the Korean won and is on track for the longest streak of gains versus the yen since 2001. U.S. oil dropped a fifth day after commodities capped their worst month since May 2012.
“Investors have been looking for an excuse to sell,” Angus Gluskie, who helps oversee more than $550 million at White Funds Management in Sydney, said by phone. “We’ve got a range of convenient reasons for investors to take some money off the table. The geopolitical risks have been rising and data flow in the U.S. is suggesting that the Fed may have to raise interest rates sooner rather than later. The Argentine issue is another piece of adverse news flow.”
VIDEO: Global Stock Selloff: There's a Thing Called Risk
Investors are looking to today’s U.S. payrolls data as they speculate over the timeline for Federal Reserve interest-rate increases after faster-than-estimated economic and wage growth. The International Swaps & Derivatives Association will meet at 11 a.m. New York time to determine whether credit-default swaps linked to Argentina have been triggered by a failure-to-pay credit event. Chinese manufacturing expanded in July, according to two gauges today, with a private measure falling short of estimates.
Asian Gauges
The Stoxx 600 dropped 1.7 percent in July, the second-biggest retreat this year. Construction and materials firms led today’s retreat, with just four of the 19 industry groups on the measure climbing.
Vinci SA plunged more than 8 percent after Europe’s biggest builder, reported first-half earnings that missed analysts’ estimates and cut its 2014 sales forecast amid falling demand in France and in U.K. construction.
VIDEO: What’s Behind the Market Selloff?
Iliad SA, the French mobile-phone carrier founded by billionaire Xavier Niel, plunged 12 percent after it offered $15 billion in cash for a controlling stake in T-Mobile US Inc., rivaling a proposal from Sprint Corp. Arkema SA fell in Paris trading after the French chemicals maker shifted back the deadline for achieving mid-term targets for profitability and sales by a year after disappointing results.
Europe’s equity benchmark trades at 15.2 times estimated earnings compared with 16.2 for the S&P 500 and 13.5 times projected profit for the MSCI Asia Pacific Index. Yesterday’s selloff erased this year’s gains in the Dow (INDU) Jones Industrial Average.
Hang Seng
The Asia-Pacific gauge fell 0.4 percent yesterday, still recording a 2.1 percent increase in July, its third monthly climb.
VIDEO: Can Stocks Continue to Rally Amid Global Tensions?
The Hang Seng Index fell 0.8 percent after jumping 6.8 percent in July, the most since September 2012. The Hang Seng China Enterprises Index retreated 1.2 percent today after a 7.7 percent surge in July saw it close at the highest level since Dec. 10 yesterday.
China’s official manufacturing purchasing managers’ index climbed to 51.7 for July, up from 51 in June and exceeding the 51.4 median estimate of economists surveyed by Bloomberg. The final reading on the HSBC Holdings Plc/Markit Economics China factory PMI was 51.7, missing estimates for it to match the preliminary reading of 52, an 18-month high.
Japan, Korea
The Topix index in Japan fell 0.6 percent in a second day of declines. The Kospi gauge in Seoul slipped 0.2 percent after reaching the highest level since August 2011 earlier this week. Samsung Electronics Co. fell 3.8 percent and capping its biggest two-day retreat since August 2012 after a disappointing earnings report.
VIDEO: European Markets Continue to Decline
In Taiwan, China Petrochemical Development Corp. (1314) shares tumbled 6.9 percent after a gas explosion in the southern city of Kaohsiung left 24 people dead and hundreds injured.
The Dow lost 317.06 points to 16,563.30, leaving it down 0.1 percent in 2014. The index had climbed 1.8 percent this year as of yesterday. Futures on the Dow rose 0.3 percent today, snapping a three-day drop.
