Stocks, Euro Fall on Europe Risk; Dollar, German Bonds Gain
By Sungwoo Park and Kana Nishizawa
May 18 (Bloomberg) -- Stocks fell and the euro slipped to a four-month low as Europe’s debt crisis worsened and a U.S. factory gauge contracted. The Dollar Index extended its longest rally and German bond yields dropped to all-time lows.
The MSCI All-Country World Index lost 0.8 percent at 8:04 a.m. in London, the Stoxx Europe 600 Index slid 1 percent and Standard & Poor’s 500 Index futures fell 0.2 percent. The euro declined to the lowest in four months, heading for a third weekly loss. German two- and 10-year bond yields dropped with benchmark bunds heading for a fifth weekly advance. The Dollar Index rose 0.4 percent in a 15-day rising streak. Oil slid for a sixth day in New York.
Almost $4 trillion has been wiped from global equity markets this month as Europe’s deepening crisis threatens the global recovery. Moody’s Investors Service lowered debt ratings at 16 Spanish banks, while Fitch Ratings cut Greece’s credit rating on concern the country may not be able to sustain euro membership. The Federal Reserve Bank of Philadelphia’s general economic index slid to minus 5.8 in May. Data today showed China’s home prices fell in a record number of cities in April.
“Investor sentiment is at its worst,” said Masaru Hamasaki, the chief strategist at Toyota Asset Management Co., which oversees the equivalent of about $23.8 billion. “We don’t know what will happen with Greece, and when something does happen, we don’t know what impact that will have. All people can do is escape from risks, a so-called panic.”
Greece Downgrade
Greece had its credit rating downgraded by one level to CCC from B- by Fitch yesterday after political leaders failed to form a government in the wake of a May 6 election. The ratings for Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest lenders, were reduced three levels by Moody’s.
In Spain, the cost of insuring against a default jumped to a record after the nation sold January 2015 bonds at an average yield of 4.375 percent, compared with 2.89 percent when they were last auctioned in April. German 10-year yields fell 2 basis points, or 0.02 percentage point, to 1.396 percent, the first time the rate has dropped to less than 1.40 percent. The two-year note yield slid 1 basis point to 0.031 percent, also a record.
The euro touched $1.2642. The 17-nation currency has fallen 2 percent since May 11, set for its third weekly loss, the longest string of declines since the period ending Jan. 13.
Asian Stocks
The MSCI Asia Pacific Index slipped 2.8 percent, its biggest drop since November, erasing the year’s gains. Almost 16 stocks declined for each that rose in the MSCI Asia Pacific index, which yesterday entered a so-called correction after falling more than 10 percent from a peak on Feb. 29. All 10 industries in the gauge declined with technology shares slumping the most. Hong Kong’s Hang Seng Index dropped 2.2 percent to a four-month low and the Shanghai Composite Index slid 1.6 percent. South Korea’s Kospi index lost 3.4 percent.
Asia’s regional benchmark has fallen 5.4 percent this week, poised for the biggest drop since September. Japan’s Topix Index is headed for a seventh weekly retreat, the longest stretch since the Sept. 11 attacks in 2001.
In the U.S., economic reports yesterday showed jobless claims were unchanged at 370,000 in the week ended May 12. That compares with the median forecast of 48 economists surveyed by Bloomberg News for a drop in claims to 365,000.
“Investors are taking money out from riskier assets given the lingering concerns about Europe’s debt problem and the economic recovery outlook,” said Shigehisa Shiroki, a chief trader on the Asian and emerging-markets team in Tokyo at Mizuho Corporate Bank Ltd. “It’s a double-whammy for Asian currencies as many countries depend on exports for growth.”
Won, Aussie
South Korea’s won touched 1,175.30 per dollar earlier today, the weakest level since December, as central bank Governor Kim Choong Soo said the nation’s financial markets are more vulnerable to European risk than those elsewhere in Asia.
India’s rupee sank to an all-time low, while Malaysia’s ringgit dropped 1.0 percent and Indonesia’s rupiah fell 0.6 percent. The Australian dollar touched a more than five-month low, extending declines to a third-straight week.
The cost of insuring Japanese corporate debt from default surged to the highest in more than seven months, according to traders of credit-default swaps. The Markit iTraxx Japan index increased 7 basis points to 218.5 basis points, according to Citigroup Inc. prices. The benchmark is on course for its highest level since Oct. 5, according to data provider CMA.
The S&P GSCI spot index of 24 commodities fell 0.4 percent, bringing this year’s losses to 2.6 percent amid speculation a global economic slowdown may hurt demand for raw materials. Crude oil in New York dropped 0.4 percent to $92.18 a barrel, heading for the third weekly decline. Soybeans in Chicago dropped 0.7 percent and gold lost 0.2 percent, while rubber futures in Tokyo fell 1.4 percent.
Asian shares tumbled and were set for their worst weekly showing since September, amid signs of growing instability among Spanish banks and political turmoil in Greece, with investors adding the la.test weak U.S. data to the list of risk factors. U.S. stocks hit a four-month low on Thursday as rising Spanish bond yields increased investor anxiety over that country's banks and another round of weak data undermined hopes for U.S. economic recovery. (Reuters)
The euro hit a four-month low, extending declines prompted by fears Greece may leave the euro zone and on contagion jitters after Moody's downgraded 16 Spanish banks. (Reuters)
FX COLUMN-Bank downgrades could rock forex players' world
- Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own -
LONDON, May 17 (Reuters) - Foreign exchange traders must be considering the practical implications for their counterparty lists if a Moody's review of 114 European institutions, due by end-June, results in widespread downgrades.
Some banks may lose business, a smaller number could gain. Client exposures and risk may become even further concentrated amongst a limited number of market participants.
FOREX-Greek, Spanish woes push euro towards 2012 low; yen off highs
TOKYO, May 18 (Reuters) - The euro hit a four-month low on Friday, extending declines prompted by fears Greece may leave the euro zone and on contagion jitters after Moody's downgraded 16 Spanish banks.
"I get a sense that for now traders would want to square their positions heading into a news-packed weekend with G8 as the main event," said Sumino Kamei, senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
U.S. wheat fell 0.7 percent as the market took a breather after climbing to a six-week high in the previous session on fears that dry conditions in the United States and Russia could curb global supply. (Reuters)
Mix of rain, drought threaten Brazil's sugar cane (Reuters)
Excess rain is slowing the progress of Brazil's cane harvest and could threaten output if the winter turns out wetter this year as expected, forecaster Somar said this week, while the opposite problem of drought is now afflicting the country's northeast.
Argentine govt cuts soy view, eyes new wheat area (Reuters)
Argentina cut its 2011/12 soy forecast to 41.5 million tonnes from 42.9 million last month and predicted 2012/13 wheat area would shrink nearly 14 percent from last season, the government said on Thursday.
Heat, wind sap wheat crop's potential in key grower Kansas (Reuters)
The promise of a bumper U.S. hard red winter wheat crop is eroding by the hour as scorching temperatures and high winds in key growing areas of the U.S. Plains sap soils of needed moisture, wheat experts said on Thursday.
Syria sugar refineries paralysed, smuggling seen soaring
LONDON, May 16 (Reuters) - Escalating violence in Syria has slowed sugar refining to a virtual standstill, with smuggling set to rise as Western sanctions hobble trade finance and disrupt imports of the staple sweetener, trade sources said.
The European Union, the United States and other Western countries have imposed sanctions on President Bashar al-Assad's government in response to the bloody crackdown on a revolt that has cost more than 9,000 lives.
Euro Coal-Stable despite oil fall
LONDON, May 17 (Reuters) - European prompt physical coal prices were little changed on Thursday, hovering at around $88.00 a tonne, despite oil's fall to its lowest level since the start of the year, traders said.
The mood in the coal market has become gloomier during the past month, with fewer players optimistic that there will be a demand-driven rise in prices in the second half.
Brent crude held steady above $107 per barrel, but prices were headed for a third straight weekly drop as a worsening euro zone crisis and weak U.S. economic data raised fears of a global slowdown that could dent oil demand. (Reuters)
Aluminium premiums hit China imports -trade (Reuters)
China, the world's top aluminium consumer, is cutting purchases of the metal after premiums for spot primary aluminium over London Metal Exchange prices hit a record in Asia, traders said on Thursday, adding to pressure on global prices.
Some Chinese steel mills defer iron ore shipments -sources (Reuters)
Some Chinese steel mills have postponed delivery of iron ore from miners including top supplier Vale as a slow steel market cuts demand for the raw material and producers expect a further drop in prices, sources at mills and traders said on Thursday.
China daily crude steel output at record in early May-CISA (Reuters)
China's daily crude steel output hit a fresh record of 2.045 million tonnes in the first 10 days of May, up 0.5 percent from the last 10 days of April, data from the China Iron & Steel Association showed.
Indonesia extends export duty to 21 metal ores
JAKARTA, May 16 (Reuters) - Indonesia will apply an export duty of 20 percent to 21 metal ores and concentrates, the finance minister said on Wednesday, extending a list of 14 metals proposed earlier this month to be subject to the duty.
In total 65 mineral categories will be affected by the new regulation, effective immediately, finance minister Agus Martowardojo said. This did not include coal.
Iron Ore-Shanghai rebar in 5th weekly loss, ore at 5-mth low
SINGAPORE, May 18 (Reuters) - China steel futures fell for a fifth time in six sessions on Friday and were on track for their worst week in three months, dogged by weak demand in the world's biggest consumer that has pushed down iron ore prices to 5-month lows.
A sustained fall in spot prices of iron ore has prompted some Chinese steel mills to delay deliveries of shipments from miners and also limited the chances of marginal suppliers eyeing a slice of the Chinese market.
London copper peeked above four-month lows on short-covering and signs that Greeks are warming to pro-austerity parties, allaying some fears the country could leave the euro zone. (Reuters)
China exports 110,000 T of refined copper -trade
HONG KONG, May 17 (Reuters) - China's smelters and merchants are delivering around 110,000 tonnes of refined copper cathode to London Metal Exchange (LME) warehouses in South Korea, traders said on Thursday, in a rare hefty outflow of inventories that could pressure copper prices.
Four large Chinese smelters have each exported about 20,000 tonnes of cathode under a duty-free tolling scheme and the rest was re-exported from duty-free bonded warehouses in Shanghai by merchants, a trading manager at a large Chinese smelter said.
China increases rare earths export quota-MOC
SHANGHAI, May 17 (Reuters) - China has issued an additional 10,680 tonnes of rare earths export quotas for this year, bringing the total amount issued so far to 21,226 tonnes, the Ministry of Commerce (MOFCOM) said on Thursday.
Baotou Steel Group, the parent of Baotou Steel Rare-Earth Hi-Tech , China's top producer of the minerals, has been given a quota for 1,447 tonnes, while the Aluminum Corp of China (CHINALCO) has received a quota for 970 tonnes, MOFCOM said.
Prices cool India's love affair with gold (Reuters)
Gold demand in India, one of the world's leading buyers, is likely to moderate in 2012 as higher inflation trims disposable income at a time prices are stubbornly high on a weak rupee, the head of the World Gold Council in the country told Reuters.
Gold rose, after posting its largest one-day gain in more than three months in the previous session, but prices were on track to drop for a third straight week on mounting worries over the euro zone debt crisis. (Reuters)
METALS-London copper inches above 4-mth lows; euro zone weighs
SHANGHAI, May 18 (Reuters) - London copper peeked above four-month lows on Friday on short-covering and signs that Greeks are warming to pro-austerity parties, allaying some fears the country could leave the euro zone.
"LME copper started rising after bouts of short-covering on the ShFE this morning ... I think this triggered the metal's upward momentum and helped lift London prices," said a Shanghai-based trader with an international firm.
PRECIOUS-Gold extends gains, but heads for 3rd straight weekly drop
SINGAPORE, May 18 (Reuters) - Gold rose on Friday, after posting its largest one-day gain in more than three months in the previous session, but prices were on track to drop for a third straight week on mounting worries over the euro zone debt crisis.
"With the reduction in net long positions, the risk of further downside diminishes," said Nick Trevethan, a senior commodity strategist at ANZ in Singapore.
Baltic sea index flat on moderate activity
May 17 (Reuters) - The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry commodities, remained flat on Thursday on moderate chartering.
The overall index, which reflects the daily freight market prices for capesize, panamax, supramax and handysize dry bulk transport vessels, was at 1,137 points.
Asia Dry Bulk-Rates to fall on ample ship supplies
SINGAPORE, May 17 (Reuters) - Rates for panamax dry bulk carriers on key Asian freight routes are expected to fall next week as freight demand fails to keep up with the increasing global fleet expansion, ship brokers said on Thursday.
The rate for panamax vessels travelling via the transpacific route dropped to a five-week low of $8,519 a day on Wednesday from $9,795 last week, pressured by ample vessel supplies.
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