Global stock recovery hit by China imports data
Longest gaining streak is over
GLOBAL stocks ended the longest winning streak in seven months and metals declined as a bigger drop in Chinese imports than analysts forecast underscored how weakness in the world’s secondeconomy is affecting trading partners.
Miners led declines in the MSCI all-country world index after China reported a 20 percent drop in September imports in dollar terms.
The index fell for the first time in 10 days. The Australian dollar fell after a nine-day rally, alongside declines for copper and gold. Treasuries gained with the euro and yen on demand for safe haven assets.
Global growth concerns sparked by China’s import slump were fanned by reports showing UK inflation turned negative and German investor confidence fell to the lowest in a year.
“It’s a bit back to reality this morning,” said Guillermo Hernandez Sampere, who helps manage about 150 million (R2.27 billion) as the head of trading at MPPM EK in Germany. “The moment the Fed will do something about rates, it will be a signal for markets that the economy is in an okay shape. As long as this does not happen, money will go in and out of equity markets.”
Decline
The MSCI all-country world index fell 0.6 percent at 10.14am in New York, halting a rally that added 8.3 percent over nine days. The Standard & Poor’s 500 index dropped 0.2 percent for its first slide in five days. The gauge had rallied 5.1 percent in October through Monday as volatility slumped to the lowest since August.
“The big concern is not rising interest rates anymore; it’s slowing growth and corporate profits,” said Patrick Spencer, the equities vicechairman at Robert W Baird in London. “Earnings are starting this week and some of the biggest banks are reporting, so that is going to set the scene.”
After the market closed, JPMorgan Chase was due to kick off a string of results from banks. Investors were bracing for bad news, with the ratio of puts to calls on the SPDR Financial Select Sector exchange
Drop in China’s September imports in dollar terms
traded fund at its highest level since March. Johnson & Johnson slipped after reporting its results.
The Stoxx Europe 600 index dropped 0.9 percent, heading for its first two-day decline in two weeks. Anheuser-Busch InBev rose after announcing an agreement to buy SABMiller for a proposed $106 billion (R1.4 trillion).
SAP gained 5.3 percent after reporting sales and operating profit that beat analysts’ estimates. Commodity company Glencore dropped 5.1 percent.
The Bloomberg dollar spot index rose 0.2 percent, while the pound touched the weakest level versus the euro since February as Britain’s inflation rate unexpectedly turned negative for the second time since 1960 in September.
The Australian dollar weakened 0.9 percent to 72.93 US cents, halting the longest rally in more than six years. New Zealand’s dollar dropped for the first time in 11 days. China is the biggest trading partner for both commodity-driven countries.
The yen firmed 0.3 percent to ¥119.73 (R13.26) per dollar, the euro advanced 0.1 percent and the Swiss franc added 0.4 percent. Sweden’s krona jumped to the strongest level in more than three months after a report showed the nation’s inflation rate unexpectedly turned positive last month.
Treasuries advanced following China’s import data, with the yield on the benchmark 10year note falling 4 basis points to 2.05 percent. The market was closed on Monday for a US federal holiday.
The MSCI emerging markets index retreated from a two-month high, sliding1.3 percent. Currencies from Indonesia, Malaysia and Taiwan weakened more than 0.8 percent versus the dollar.
A gauge of exchange rates for 20 developing nations declined for a second day, losing 0.6 percent. – Bloomberg