Shares fall on G20 dis­ap­point­ment, Fed hike wor­ries

The Pak Banker - - MARKETS/SPORTS -

Shares re­treated in Europe and Asia on Mon­day af­ter a week­end meet­ing of G20 fi­nance chiefs ended with no new plan to spur global growth and as in­vestors fret­ted the US Fed­eral Re­serve could raise in­ter­est rates be­fore year-end.

The dol­lar, how­ever, tum­bled against the Ja­panese yen as in­vestors sought shel­ter from the fall in eq­ui­ties, which saw Chi­nese stocks lose nearly 3 per­cent. Gold, an­other "safe haven", rose and was on track for its best month in four years.

G20 fi­nance min­is­ters and cen­tral bankers, meet­ing in Shang­hai on Fri­day and Satur­day, agreed to use "all pol­icy tools - mon­e­tary, fis­cal and struc­tural - in­di­vid­u­ally and col­lec­tively" to reach the group's eco- nomic goals. But there was no plan for co­or­di­nated stim­u­lus, which some in­vestors had been seek­ing af­ter con­cerns about a slow­down in China de­pressed mar­kets at the be­gin­ning of 2016. The pan-Euro­pean FTSEurofirst 300 in­dex .FTEU3 fell 1 per­cent and Ger­many's DAX .GDAXI was down 1.5 per­cent. Bri­tain's FTSE 100 in­dex .FTSE lost 0.8 per­cent. "Mar­kets looked at the G20 meet­ing and found it a tad dis­ap­point­ing, what they had been look­ing for was a uni­fi­ca­tion of the G20 to do some­thing as a force," said Peter Low­man, CIO of In­vest­ment Quo­rum, a Lon­don-based wealth man­age­ment firm.

MSCI's broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan .MIAPJ0000PUS dipped 0.6 per­cent and ap­peared likely to post its se­cond con­sec­u­tive month of losses, with a 1.2 per­cent drop so far this month.

Chi­nese shares closed at one-month lows. The CSI300 in­dex .CSI300 of the largest listed com­pa­nies in Shang­hai and Shen­zhen, closed down 2.5 per­cent while the Shang­hai Com­pos­ite in­dex .SSEC fell 2.9 per­cent on con­cern ris­ing real es­tate prices would see funds with­drawn from shares. Tokyo's Nikkei .N225 lost 1 per­cent as the yen gained, mak­ing life more dif­fi­cult for Ja­panese ex­porters, and on China wor­ries. The yen JPY= gained 1 per­cent to 112.90 per dol­lar. The euro dipped 0.1 per­cent to $1.0922. The dol­lar fell 0.1 per­cent against a bas­ket of its peers .DXY, hav­ing gained on Fri­day af­ter up­beat U.S. data show­ing the U.S. econ­omy grew faster than pre­vi­ously thought in the last quar­ter of 2015. That re­vived ex­pec­ta­tions U.S. in­ter- est rates could rise again this year. Any 2016 hike had been priced out of mar­kets but fed­eral funds fu­tures im­plied an around 50 per­cent chance of a rise in De­cem­ber.

Ster­ling GBP=, which took a hit last week on wor­ries Bri­tons could vote to leave the Euro­pean Union in a June ref­er­en­dum, was steady at $1.3876.

Weaker stocks helped raised in­vestor ap­petite for low-risk govern­ment debt. U.S. 10-year Trea­suries US10YT=RR yielded 1.75 per­cent, com­pared with 1.77 per­cent in New York on Fri­day.

Ger­man 10-year Bund DE10YT=TWEB yields fell nearly 3 ba­sis points to 0.12 per­cent and Bri­tish gilt GB10YT=RR yields fell 5 bps to 1.36 per­cent. Bund traders were look­ing to pre­lim­i­nary euro zone in­fla­tion data for clues to pos­si­ble fur­ther stim­u­lus from the Euro­pean Cen­tral Bank. "To­day's prospec­tive de­cline in the HICP flash es­ti­mate comes with down­side risks given Fri­day's coun­try re­leases," Com­merzbank an­a­lysts Rainer Gun­ter­mann said. "Spec­u­la­tion about bolder ECB mea­sures... could un­fold." Oil prices edged up as some in mar­kets said a fall, which has seen crude lose some 70 per­cent since mid-2014, may have reached a bot­tom. Data on Fri­day showed a fall in the num­ber of U.S. shale oil rigs in pro­duc­tion.

Brent crude LCOc1 rose 17 cents a bar­rel to $35.27. It is up 18 per­cent since Feb. 11, the last day on which it dipped below $30. Gold XAU= gained 0.7 per­cent to $1,230 per ounce and has risen 10 per­cent so far this month, its best per­for­mance in four years.

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