Global stocks drop as Ja­pan GDP, China ex­ports shrink

The Pak Banker - - MARKETS/SPORTS -

Global eq­ui­ties dropped with US stock in­dex fu­tures, while oil and cop­per fell as re­ports showed Ja­pan's econ­omy and Chi­nese ex­ports are shrink­ing. Haven as­sets in­clud­ing the yen, gold and U.S. Trea­suries ral­lied. The MSCI Asia Pa­cific In­dex re­treated from near a two-month high, while the Stoxx Europe 600 In­dex slid for a se­cond day. Brent crude de­clined, af­ter clos­ing on Mon­day above $40 a bar­rel for the first time this year, as nickel led losses in in­dus­trial me­tals and iron ore tum­bled. Aus­tralia's dol­lar weak­ened with South Africa's rand, while the yen strength­ened against all 31 ma­jor peers. Gold climbed to a 13-month high as Ja­pan's 10-year bond yield sank to a record.

Sus­tained de­mand for pre­cious me­tals and sov­er­eign debt high­lights a lack of con­fi­dence in the re­bounds in global stocks and com­modi­ties that took hold over the last three weeks, a pe­riod in which $4.6 tril­lion was added to the value of eq­ui­ties world­wide. Gold­man Sachs Group Inc. rec­om­mends bet­ting on de­clines in cop­per and alu­minum prices, while Cit­i­group Inc. said it's still bear­ish on iron ore. Ja­pan an­nounced on Tues­day a drop in fourth-quar­ter gross do­mes­tic prod­uct and China re­ported the big­gest tum­ble in ex­ports in al­most six years.

"While there's a like­li­hood of a pull­back in the short term, in­vestors should use this as an op­por­tu­nity to buy into value plays," said Nader Naeimi, Syd­ney-based head of dy­namic mar­kets at AMP Cap­i­tal In­vestors Ltd., which over­sees about $115 bil­lion. "The tail risk from China con­tin­ues to re­duce. It's quite clear that they are pretty keen to sta­bi­lize growth. That's pos­i­tive for com­modi­ties, emerg­ing mar­kets and global growth."

China is us­ing a mix of mon­e­tary and fis­cal stim­u­lus to sup­port its econ­omy, while the Euro­pean Cen­tral Bank is widely ex­pected to de­liver a pack­age of eas­ing mea­sures at a March 10 pol­icy meet­ing to re­vive euro- area growth and in­fla­tion. Ger­man in­dus­trial pro­duc­tion jumped more than econ­o­mists fore­cast in Jan­uary, a sign that strong do­mes­tic de­mand may be help­ing to un­der­pin fac­to­ries even as ex­ter­nal growth cools, data showed Tues­day. The Stoxx Europe 600 In­dex slid 1.1 per­cent as of 8:08 a.m. Lon­don time, while Stan­dard & Poor's 500 In­dex fu­tures de­clined 0.7 per­cent.

The MSCI Asia Pa­cific In­dex fell 0.7 per­cent as all 10 in­dus­try groups re­treated. Ja­pan's Topix dropped 1 per­cent and Hong Kong's Hang Seng In­dex lost 0.7 per­cent. The Shang­hai Com­pos­ite In­dex gained 0.1 per­cent. Ja­pan's econ­omy con­tracted an an­nu­al­ized 1.1 per­cent last quar­ter, and while the drop was less than an­a­lysts pre­dicted it un­der­scored grow­ing con­cern over Prime Min­is­ter Shinzo Abe's re­fla­tion pro­gram. China's ex­ports tum­bled 25.4 per­cent from a year ear­lier in dol­lar terms in Fe­bru­ary as im­ports fell for the 16th month in a row.

"The ex­ports data are very, very poor," said Cas­tor Pang, head of re­search with CorePa­cific Ya­maichi Hong Kong. "The huge de­cline doesn't auger well for the stock mar­ket." The yen strength­ened 0.5 per­cent ver­sus the dol­lar, gain­ing for a se­cond day. Bank of Ja­pan Gov­er­nor Haruhiko Kuroda told par­lia­ment on Mon­day he doesn't think ad­di­tional stim­u­lus is needed at the present time.

"The yen is gain­ing partly be­cause Kuroda is deny­ing im­mi­nent fur­ther eas­ing," said Shinichiro Kadota, a for­eign-ex­change strate­gist at Bar­clays Plc in Tokyo. "That's ef­fec­tively telling spec­u­la­tive play­ers to go ahead and buy the yen."

China's yuan climbed 0.18 per­cent as the cen­tral bank raised its daily ref­er­ence rate for the cur­rency fol­low­ing Mon­day data that showed a slide in the na­tion's for­eignex­change re­serves mod­er­ated in Fe­bru­ary. The Aus­tralian and New Zealand dol­lars fell 0.6 per­cent, while South Africa's rand slumped 1 per­cent.

Iron-ore fu­tures



Sin­ga­pore Ex­change fell 5.2 per­cent, af­ter a record 19 per­cent jump on Mon­day. Cit­i­group said it's still bear­ish as sup­ply and de­mand fun­da­men­tals re­main weak, while Ax­iom Cap­i­tal Man­age­ment Inc. said the price surge was prob­a­bly just a "blip".

Cop­per fell 0.8 per­cent in Lon­don, trim­ming this month's ad­vance to 5.7 per­cent. Nickel slid 2.7 per­cent, re­treat­ing from its high­est close since Novem­ber, and alu­minum lost 0.2 per­cent. Gold­man Sachs Group Inc. re­it­er­ated its view that the struc­tural driv­ers for last year's slump in in­dus­trial me­tals prices re­main in­tact, pre­dict­ing drops of as much as 20 per­cent for cop­per and alu­minum over the next 12 months.

Gold ad­vanced 0.6 per­cent to $1,274.32 an ounce, headed for its high­est close in more than a year. The pre­cious metal last week en­tered a bull mar­ket -- com­monly de­fined as a 20 per­cent ad­vance from the most re­cent low -- and plat­inum and pal­la­dium fol­lowed suit on Mon­day.

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