BLBG: U.S. Stocks Fall as Oil Renews Selloff; Yen Strengthens
U.S. stocks fell for a third day as oil approached a five-year low after OPEC cut its demand forecast. European equities rebounded after the biggest drop in seven weeks and the yen strengthened.
The Standard & Poor’s 500 Index fell 0.3 percent at 9:31 a.m. in New York. The Stoxx Europe 600 Index climbed 0.3 percent. Greece’s ASE Index fell 1.4 percent and the yield on the government’s three-year notes jumped 119 basis points to 9.49 percent. The Shanghai Composite Index (SHCOMP) added 2.9 percent as slowing inflation bolstered the case for monetary easing. West Texas Intermediate crude slid 2.4 percent to $62.29 a barrel. The yen headed for its biggest three-day gain since April.
OPEC lowered its demand forecast for 2015 to the lowest level in 12 years amid surging U.S. shale supplies and reduced estimates for global consumption. The prospect of a presidential election in Greece fueled speculation opponents of the European Union’s bailout terms may gain more power. Treasury 10-year notes are set to draw the lowest auction yield in 18 months as the outlook for slowing inflation and demand for haven assets drives investor appetite for the securities.
“Oil is lower on the reduced demand outlook and it’s not a surprise to see the rest of the market, at least in sympathy, going down on that,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “Without any news to prompt the market to move higher today, it puts the onus back on the bulls to see how much conviction they have in buying stocks.”
OPEC Forecast
The S&P 500 closed little changed yesterday after reversing a loss of as much as 1.3 percent. The gauge has jumped 11 percent in 2014, heading for a third year of gains, fueled by better-than-forecast economic data and corporate earnings.
The MSCI All-Country World Index dropped 0.2 percent for a third day of losses.
The Organization of Petroleum Exporting Countries lowered its projection for 2015 by about 300,000 barrels a day, to 28.9 million a day. Prices now are below what 10 out of OPEC’s 12 members need for their annual budgets to break even, according to data compiled by Bloomberg. Kuwait and Qatar are the exceptions.
“I can see no news that would give any reason to buy oil at the moment,” Christopher Bellew, senior broker at Jefferies International Ltd. in London, said by e-mail.
Copper led industrial metals lower, declining 0.6 percent to $6,443 a metric ton on the London Metal Exchange.
Emerging Stocks
The MSCI Emerging Markets Index lost 0.2 percent, headed for an eight-month low. London. Saudi Arabia’s benchmark Tadawul All Share Index slumped 2.5 percent as Brent crude slipped 1.7 percent to $65.69 in London trading.
Technology and chemical stocks led gains among 19 industry groups in the Stoxx 600. Oil and gas producers fell the most. The index fell 2.3 percent yesterday.
Ashtead Group Plc climbed 8.8 percent after reporting better-than-estimated first-half profit and saying annual financial results will exceed its previous forecasts.
Sika AG, the Swiss sealants and adhesives maker, fell for a third day, dropping 3.6 percent as its controlling shareholder pushed to change the board to prepare for a sale of its stake to Cie. de Saint-Gobain SA.
“Yesterday’s selloff was a bit overdone -- a good case of some selling panic hitting very low December volumes,” Michael Woischneck, who helps oversee the equivalent of $7.7 billion at Lampe Asset Management in Dusseldorf, Germany. “Investors were right to be concerned with the gamble of an early presidential election. But although it’s important for Greece, it’s not a game changer. Europe is steady enough to cope with whatever comes out of Greece.”
Greek Assets
While most of the 18 western-European markets increased, Greece’s ASE fell for a second day, after losing 13 percent yesterday, the most since 1987.
Greek securities extended losses into a third day, dragging down government bonds from the euro-area’s most-indebted nations and boosting demand for the safest fixed-income assets. The nation’s 10-year yield increased 39 basis points to 8.57 percent, the highest since Oct. 17.
Italy’s 10-year yield rose three basis points to 2.07 percent. The rate on German bunds fell to a record 0.678 percent.
U.S. Treasuries are also gaining from the haven demand. The bid-to-cover ratio at a sale of three-year notes yesterday, which gauges demand by comparing total bids with the amount of securities offered, was 3.24, compared with 3.18 last month.
Bonds, Yen
The 10-year notes being offered today yielded 2.22 percent in pre-auction trading, which would be the lowest level at the monthly sales since June 2013.
The yen strengthened, heading for its biggest three-day gain versus the dollar since April. It jumped 0.3 percent to 119.29 per dollar, extending its three-day gain to 1.8 percent, the most since the period ended April 8. Japan’s currency rose 0.3 percent to 147.65 per euro. The dollar traded at $1.2376 per euro.
The Shanghai Composite rallied as a 10-day measure of price swings jumped to the highest since September 2009. The gauge retreated from a 3 1/2-year high yesterday amid record turnover in China. Volatility in stocks has increased as investors assess the sustainability of a rally that topped every other market worldwide during the past month.
The Hang Seng China Enterprises Index (HSCEI), which tracks mainland Chinese stocks listed in Hong Kong added 0.4 percent today after declining the most in three years yesterday.
China ‘Dis-inflation’
Chinese producer prices slipped 2.7 percent in November from a year before, a 33rd straight decrease, while consumer inflation slowed to 1.4 percent, versus an estimate for 1.6 percent, reports today showed.
The rising risk of deflation increases pressure on the People’s Bank of China to follow up last month’s surprise interest-rate cut with further monetary easing, such as reducing banks reserve requirement ratios.
“China has entered into a rapid dis-inflation process, and faces the risk of deflation,” said Liu Li-Gang, the chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “As the PBOC has exhausted its newly invented and ineffective policy tools, we believe the next move will have to be a reserve ratio requirement cut in order to regain policy effectiveness and credibility.”
Russia’s ruble slid 0.4 percent to 54.2895 per dollar while the Micex Index gained 2.4 percent.
The yield on the 10-year bond fell for the first time in 12 days, retreating 19 basis points to 12.78 percent after reaching a five-year high yesterday. Yields have climbed this month on bets the Bank of Russia will take steps to curb a depreciation that has wiped out almost 40 percent of the ruble’s value this year.
Policy makers will probably increase the key rate to 10 percent from 9.5 percent when they meet tomorrow, according to the median estimate of 27 economists surveyed by Bloomberg.
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: Jeff Sutherland at jsutherlan13@bloomberg.net Jeremy Herron, Stephen Kirkland
