BLBG: Stocks Fall With Oil on Growth Concern as Bonds, Yen Gain
Stocks fell around the world and Treasuries rose with gilts as an unexpected slide into recession in Japan spurred concern the global economic slowdown will deepen. The yen strengthened and oil declined.
The Stoxx Europe 600 Index lost 0.3 percent at 7 a.m. in New York. Standard & Poor’s 500 Index futures (SPX) also retreated 0.3 percent. Halliburton Co. declined after agreeing to buy Baker Hughes Inc. Japan’s currency gained against all but four of its 16 major counterparts and the Topix dropped the most in six weeks. The yield on 10-year Treasuries declined three basis points to 2.29 percent. Chinese shares in Hong Kong slid as a trading link between the city and Shanghai began. Brent crude fell 0.8 percent to $78.79 a barrel and U.S. natural gas rose.
Japan’s economy, the world’s third largest, contracted 1.6 percent last quarter from a year before, missing a 2.2 percent gain predicted in a Bloomberg survey. U.S. industrial production probably grew in October, economists said before a report today. About $3.5 trillion has been added to the value of global equities since Oct. 16 amid signs the U.S. was weathering a slowdown in Europe and Asia, while the Bank of Japan boosted stimulus measures.
“After a significant rally on the Bank of Japan’s decision to introduce more stimulus, the market is reacting to shock that there was actually a recession there,” said Francois Savary, chief investment officer of Reyl & Cie. in Geneva. “It’s time to take back some of those gains but not to overreact. The weakness of Japan really increases the fact that we rely too much on the U.S. to support global growth.”
Three shares declined for every one that advanced in the Stoxx 600, with trading volumes 41 percent lower than the 30-day average, according to data compiled by Bloomberg.
Sonova Misses
Sonova Holding AG fell 1.8 percent after the Swiss maker of hearing aids posted first-half profit that missed analysts’ estimates.
Merck KGaA jumped 3 percent after saying it will receive $850 million and could get up to $2 billion in regulatory and commercial milestone payments to develop and commercialize a tumor treatment with Pfizer Inc.
Pfizer fell 2.5 percent in European trading. The drugmaker cut its earnings forecast to reflect the $850 million upfront payment.
Baker Hughes jumped 19 percent in early New York trading after Halliburton agreed to buy the company for $78.62 in cash and stock. Halliburton slid 4.7 percent.
Futures on the S&P 500 expiring in December declined after a fourth weekly increase. The index rallied 9.5 percent from its low last month.
The MSCI Emerging Markets Index lost 0.4 percent. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong sank 1.9 percent, the most since Sept. 10. The Shanghai Composite Index slipped 0.2 percent.
China Link
International investors purchased 13 billion yuan ($2.1 billion) of Shanghai shares, triggering a halt in buy orders for the rest of the day. Mainland investors used about 1.7 billion yuan of their 10.5 billion yuan quota in Hong Kong.
China’s bad loans jumped by the most since 2005 in the third quarter, China Banking Regulatory Commission said in a statement on Nov. 15.
Russia’s ruble slid for a third day, declining 0.4 percent 47.36 per dollar. The Micex gained 0.6 percent, up for a second day as a weaker ruble boost the profit outlook for exporters.
European Union foreign ministers met today in Brussels to discuss adding to sanctions that have limited access to capital markets for some Russian banks and companies and blacklisted officials involved in the conflict. New measures will likely target pro-Russian separatist leaders, the EU said.
Gulf Shares
Persian Gulf stocks fell with oil. Saudi Arabia’s Tadawul All Share Index dropped 2.9 percent, heading for the lowest close since March. Benchmark gauges in Dubai and Abu Dhabi lost more than 1 percent.
The yen gained 0.4 percent to 145.14 per euro and 0.1 percent versus the dollar. The Topix index of stocks slid 2.5 percent.
Japan’s second straight drop in gross domestic product, matching the textbook definition of a recession, followed a revised 7.3 percent contraction in the second quarter that coincided with an increase in the national sales tax from 5 percent to 8 percent.
“The prime minister in all likelihood is going to say, look, we’re going to reduce the likelihood of Japan falling into recession again next year by taking away the VAT hike,” Jesper Koll, the head of Japan equity research in Tokyo at JPMorgan Chase & Co., said in a Bloomberg TV interview.
Bonds Gain
The 10-year Treasury yield earlier touched 2.28 percent, the least since Nov. 10. The rate on similar-maturity U.K. bonds fell two basis points to 2.10 percent, while German 10-year rates were little changed at 0.79 percent.
U.S. natural gas futures rose 3 percent to $4.141 per million British thermal units, the biggest gain in 11 days, amid colder weather. The fuel rose 2 percent in the U.K. after supply disruptions from the North Sea.
Brent crude futures extended the contract’s longest weekly decline since it began trading in 1988. West Texas Intermediate dropped 0.6 percent to $75.38 in New York.
Members of the Organization of Petroleum Exporting Countries are stepping up diplomacy before their Nov. 27 meeting to discuss production levels. Iran’s oil minister is preparing to visit the United Arab Emirates this week, according to Shana, the Tehran-based ministry’s news service.
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 Stuart Wallace
