China stocks slump, dollar limps after worst drubbing in 5 months

US markets closed for Thanksgiving holiday

LONDON, Nov 23, (Agencies): The dollar was on the defensive Thursday, a day after its worst drubbing in five months, as the biggest slump in Chinese stocks in almost two years took the shine off another record high in a global equities bull run.

The near 3 percent drop in China reflected its recent bond markets worries, adding to a subdued mood in Europe where, with trading constrained by the Thanksgiving holiday in the United States, the main bourses opened in the red for the 10th day in the last 13.

Surveys covering Europe’s services and manufacturing industries outshone the most optimistic forecasts in Reuters polls, with factories having the secondbest month in the index’s history. That helped some European stock markets regain lost ground, and by early afternoon the pan-European STOXX 600 was up 0.1 percent after opening 0.3 percent lower.

The MSCI world equity index, which tracks shares in 47 countries, was up 0.1 percent, having earlier touched a record high.

Britain’s FTSE 100 was down 0.2 percent, trimming opening losses of 0.5 percent. One of the index’s heavyweight utilities Centrica crashed over 16 percent in what could be is biggest daily drop ever.

Moves were expected to be minor in light of Thanksgiving. Japanese markets had also been closed, though there was no shortage of action in Asia.

The dollar’s rout took it as low as 111.07 yen after minutes of the Federal Reserve’s last meeting showed many participants were concerned inflation would stay below the bank’s 2 percent target for longer than expected.

That view echoed comments from Chair Janet Yellen and led markets to pare back pricing for more rate hikes next year.

The dollar clawed back to 111.14 yen in Europe but the overnight move was its largest single-day fall against the Japanese currency since May.

Against a basket of currencies, the dollar stood at 93.086 , having shed 0.75 percent overnight.

The euro was enjoying the view at $1.1850 after climbing from $1.1731 on Wednesday.

The Fed’s dovish turn helped break a sell-off in short-term US Treasuries, with yields on the two-year note falling almost five basis points to 1.727 percent. That was the sharpest daily drop since early September.

The rally spilled over into Asia, where Australian 10-year bond yields fell to their lowest since June.

MSCI’s broadest index of Asia-Pacific shares outside Japan eked out a 10year peak with a rise of 0.15 percent, as did Hong Kong’s main index.

Wall Street had been an oasis of calm in comparison, with the Dow closing for the Thanksgiving break off 0.27 percent, while the S&P 500 lost 0.08 percent and the Nasdaq added 0.07 percent.

Commodities were pushed onto the back foot again as the dollar started to recover in Europe. Gold was flat at $1,292.02 an ounce having added 0.9 percent overnight.

Oil prices paused after hitting their highest in more than two years after the shutdown of one of the largest crude pipelines from Canada cut supply to the United States.

US crude futures eased back 12 cents to $57.86 a barrel, after jumping 2 percent on Wednesday to ground last trod in mid-2015. Brent crude dipped 0.6 percent to $62.92 a barrel.

Europe

The pan-European STOXX 600 index ended flat on Thursday, while euro zone blue chips erased early losses to trade up 0.3 percent after business surveys for the bloc cemented optimism on the economy. Euro zone businesses boomed in November with flash composite, services and manufacturing PMIs beating all forecasts in Reuters polls.

British stocks ended flat, as energy firm Centrica plummeted after results.

Centrica dropped 15.5 percent, its biggest daily drop ever, after it lost 823,000 or about 6 percent of its energy customers in four months and full-year earnings missed market estimates. Among the leading European gainers was Altice, jumping 3.9 percent after a report the debt-ridden French telecoms and cable group was looking to sell its telecoms network in the Dominican Republic. Its shares are still down nearly 60 percent from the start of the year as funds sold out of the company’s US unit.

Thyssenkrupp reversed early losses to trade up 3.9 percent after demand for elevators helped boost its orders to a fiveyear high.

Telecom Italia shares rose 4.8 percent on speculation about a possible spin-off of its telephone network, and after the firm said it would work with Rome under special “golden powers” to protect it as a strategic asset.

As the earnings season drew near its close, MSCI Europe earnings growth was tracking 10.1 percent in dollar terms while companies in the MSCI EMU enjoyed 11.1 percent earnings growth. Analysts have been revising down earnings estimates for European companies this quarter. Deutsche’s Weidenbach put this down to the strengthening euro denting expectations for earnings from foreign-exposed companies especially in healthcare and consumer staples.

UK

A fall in Centrica’s shares weighed on British stocks on Thursday, but a rebound in housebuilders and a weak pound provided enough support to recoup most of the morning’s losses.

Britain’s blue chip FTSE 100 index closed down 0.02 percent at 7417.24 points. Centrica was by far the biggest faller, down 15.5 percent — its biggest one-day loss since listing in 1997, after the utility gave a disappointing trading update.

Centrica said it had lost 823,000 energy supply customers in four months.

Shares in utility peers National Grid and SSE also declined 2.8 percent and 0.6 percent respectively.

Babcock was the second-weakest performer of the FTSE, retreating in the wake of brokers cutting their target prices after the engineering outsourcing group published its results on Tuesday. Housebuilders recouped some of the previous session’s losses, with Berkeley Group, Barratt Developments and Taylor Wimpey all rising close to 1.9 percent.

The sector was hit after UK finance minister Philip Hammond said in his Budget on Wednesday that the government would reclaim land that was not developed quickly enough.

Sage Group was the FTSE’s biggest gainer, up 2.7 percent after several brokers upped their price targets for the stock.

British water utility Severn Trent Plc rose 0.6 percent after it reported a 4.4 percent rise in half-year profit.

Among mid caps, pub operator Mitchells & Butlers closed about 7 percent down after reporting its full year earnings.

The company’s full year profit slid due to higher costs, and said that it would not pay an interim dividend in 2018.

Asia

The dollar struggled Thursday in Asia following the previous day’s losses as dovish Federal Reserve minutes rowed back expectations for US interest rate hikes.

In Asian trade Thursday the dollar was flat against the yen, euro and pound, having tumbled against all three on Wednesday.

But higher-yielding units were well up. The Australian dollar 0.9 percent up and the Canadian dollar rising 0.4 percent, with both commodity-reliant currencies boosted by a recent jump in oil prices. South Korea’s won added 0.4 percent, the Mexican peso jumped 0.8 percent and the Indonesian rupiah was 0.2 percent higher while India’s rupee strengthened 0.3 percent. The Singapore dollar, Malaysian ringgit and New Zealand dollar were also sharply higher. The euro was also lifted by hopes of an agreement on Britain’s bill to leave the European Union, while Germany’s Chancellor Angela Merkel continues efforts to reach a deal to form a coalition government.

There are hopes she can persuade the opposition Social Democrat leader Martin Schulz to reconsider an alliance to avert months of paralysis in Europe’s biggest economy.

On equity markets Hong Kong sank one percent a day after closing above 30,000 for the first time in a decade.

Singapore fell 0.2 percent, while Seoul was off 0.1 percent.

Shanghai dived 2.3 percent on profittaking and worries about government moves to crack down on risk-taking lead dealers to shift to cash holdings.

Sydney and Wellington were both flat but Manila, Taipei and Mumbai were up.

Hong Kong — Hang Seng: Down 1.0 percent at 29,707.94 (close)

Shanghai — Composite: Down 2.3 percent at 3,351.92 (close)

Tokyo — Nikkei 225: Closed for a public holiday

Dollar/yen: Up at 111.20 yen from 111.18 yen

Oil

Oil slipped on Thursday on concerns that rising US output would hamper OPEC’s attempts to tighten supplies, outweighing worries about the shutdown of a major US pipeline.

Brent crude traded at $62.92 per barrel at 1216 GMT, or 40 cents below its last close.

US light crude was down 16 cents on the day at $57.86, easing back from a two-year high of $58.15 hit on Wednesday following news that TransCanada Corp’s Keystone pipeline was shut due to an oil spill.

The pipeline carries 590,000 barrels per day (bpd) from Canada to the United States. It is expected to stay shut for several weeks. The boost to prices was short-lived as rising output in the United States has renewed concerns about global oversupply.

US output has risen by 15 percent since mid-2016 to a record 9.66 million bpd, helping turn the United States from the world’s biggest importer to a major exporter.

Climbing US output threatens efforts by the Organization of the Petroleum Exporting Countries, Russia and some other non-OPEC producers to reduce global supplies by limiting their production.

Gold

Gold steadied on Thursday after rising nearly 1 percent in the previous session as the dollar sank on reduced expectations for US interest rate hikes next year.

The dollar suffered its biggest drop in five months on Wednesday after minutes from the US Federal Reserve’s showed “many participants” were concerned inflation would stay below the bank’s 2 percent target for longer than expected. The greenback was still nursing losses on Thursday, supporting dollar-priced gold by making it cheaper for non-US investors.

Spot gold was 0.1 percent lower at $1,290.82 per ounce by 1313 GMT on Thursday. US gold futures for December delivery were 0.1 percent lower at $1,291.20.

Trading was lighter than usual on Thursday, with Japanese financial markets shut for a public holiday while US markets will be closed for the Thanksgiving holiday.