BLBG: Emerging Stocks Drop Ahead of Fed; Krona Hits 2-Month Low on QE
European shares swing as Volkswagen posts loss on scandal
Fed commentary in focus as few traders expect rate increase
Chinese shares led emerging-market stocks lower, while gold advanced as investors awaited commentary from the Federal Reserve. Sweden’s krona touched a two-month low after the central bank expanded its asset-purchase program and the Australian dollar plunged after a weak inflation report.
The MSCI Emerging Markets Index dropped as the Hang Seng China Enterprises Index retreated the most in a month. The Stoxx Europe 600 Index climbed as Volkswagen AG rose after increasing provisions for its emissions scandal. Futures on the Standard & Poor’s 500 Index pared gains. The krona spiked lower after Sweden’s central bank committed to buying more bonds while holding rates steady. The Aussie tumbled after inflation came in below estimates. Base metals retreated.
“I don’t think the Fed is going to risk tightening policy this year,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which oversees about $112 billion, said by phone. “It looks like markets have stalled, but we still have some cash and if markets pull back, we are using that as a buying opportunity. We’re starting to see the pressure abating on earnings.”
Investors will parse Fed commentary for clues on how oil’s decline and China’s slowdown are impacting policy makers’ thinking as they mull the timing of the first U.S. interest-rate increase since 2006. Orders for U.S. business equipment unexpectedly declined in September, adding to a slew of recent data that’s signaled the recovery in the world’s largest economy may be losing steam. Australia’s weaker-than-estimated third-quarter inflation report added to speculation the central bank will have room to lower interest rates.
Stocks
MSCI Inc.’s developing-nation equity gauge dropped 0.6 percent by 8:35 a.m. in London, a sixth retreat in seven days. Basic resources firms declined the most of the 19 groups on the Stoxx 600 as copper and nickel led industrial metals lower.
A measure of Asia-Pacific stocks retreated 0.4 percent, led by energy shares. A subindex of oil and gas companies in the regional gauge dropped 18 percent this year through Tuesday, almost twice the decline registered by miners, the second-worst performing group.
The Hang Seng China Enterprises Index dropped 1.5 percent in Hong Kong, paring its advance this month to 12 percent, while the Hang Seng Index fell 0.8 percent. The Shanghai Composite Index retreated 1.7 percent. China’s benchmark equity gauge finished little changed Tuesday, recovering from a drop of as much as 2.8 percent.
The Jakarta Composite Index slid 1.5 percent. Benchmark gauges in Thailand, Taiwan, Malaysia and India all retreated. Emerging-market indexes had recorded some of the biggest gains since the Fed’s September meeting, when it unexpectedly cited concerns about risks to the global economic outlook as a reason for standing pat.
Tokyo’s Topix index rose 0.3 percent, boosted by a 4.7 percent jump in the shares of Fanuc Corp. after the robot maker boosted its full-year operating profit forecast and was raised to buy from outperform at CLSA. Mitsubishi Motors Corp. climbed 6.6 percent, the most since February last year, after first-half earnings beat estimates.
S&P 500 futures were 0.2 percent higher after the measure lost 0.3 percent Tuesday. The gauge closed on Friday at a two-month high. The index remains on track for its best monthly advance in four years as it rebounds from a summer swoon.
Commodities
The Bloomberg Commodity Index was little changed. It fell 0.4 percent Tuesday for a fifth straight decline, the longest run of losses since August.
Gold for immediate delivery climbed 0.4 percent to $1,171.06 per ounce. Open interest, a tally of outstanding futures contracts, suggests investors are readying for a rally on expectations that the Fed will signal rates are likely to stay low for longer, according to RBC Capital Markets.
Copper for three-month delivery on the London Metal Exchange dropped 0.9 percent, while nickel also retreated 0.9 percent amid concern that the slowdown in China -- the world’s biggest consumer -- is going to be prolonged. Iron ore tumbled to the lowest close since July 27 on the Dalian Commodity Exchange. The deputy head of the China Iron & Steel Association said on Wednesday that demand is collapsing along with prices, banks are tightening lending and losses are stacking up.
West Texas Intermediate oil rose 0.3 percent Wednesday. The contract dropped 1.8 percent to settle at $43.20 a barrel in New York, the lowest close since Aug. 27.
Oil’s rally above $50 a barrel earlier this month failed as surging U.S. inventories bolstered speculation that a global glut will be prolonged. A report Wednesday is expected to show inventories rose by 3.1 million barrels last week.
U.S. natural gas futures was little changed at $2.09 per million British thermal units in New York. The contracts erased a loss of as much as 5.5 percent Tuesday after touching $1.948 -- the first time it’s traded below $2 since April 2012 -- on speculation that low prices and the approach of winter will ease a supply glut. Prices dropped more than 40 percent in the past year.
Currencies
The Aussie tumbled 0.9 percent to 71.27 U.S. cents and was lower against all of its 16 major peers after the statistics bureau said consumer prices rose 0.5 percent in the third quarter from the previous three months, compared with the median estimate for a 0.7 percent advance.
The currency dropped the most in a week on Tuesday as prices of commodities declined for a fifth session and amid uncertainty about what central banks in the U.S. and Japan will do at meetings this week. At the same time, the strongest El Nino in 18 years risks exacerbating scorching temperatures that Goldman Sachs Group Inc. says threaten to cut growth in 2016 to the weakest in 24 years, adding further pressure to the Reserve Bank of Australia’s rate deliberations.
The euro was little changed at $1.1041, approaching its Oct. 23 close of $1.1019, amid speculation that the European Central Bank will extend its stimulus programs later this year. Downward pressure on prices could warrant more monetary policy steps and the evolving situation will continue to be discussed by policy makers, ECB Executive Board member Benoit Coeure said at an event in Mexico City.
The yen was little changed at 120.31. The currency has strengthened this week as investors opted for its relative safety before policy decisions from the Fed and Bank of Japan. Economists are split on whether the BOJ will boost its already record stimulus at an Oct. 30 meeting.
The Norwegian krone extended its 1.5 percent Tuesday drop, falling 0.2 percent. Malaysia’s ringgit erased an early drop with South Korea’s won. New Zealand’s dollar dropped 0.4 percent. Indonesia’s rupiah added 0.8 percent.
China’s yuan touched a one-month low in offshore trading. The People’s Bank of China will make one more cut to banks’ required reserve ratio this year but leave both the lending and deposit interest rates at current levels through to 2017, according to the median of analysts estimates in an Oct. 19-27 survey by Bloomberg News. Growth in the final three months will be 6.9 percent from a year earlier. That’s more optimistic than the 6.8 percent projected for the quarter in an earlier poll.
