Tuesday, 16 June, 2015

China Stocks Lead Global Retreat, Bonds Fall on Fed, Greece

(Bloomberg) — Chinese stocks led global shares and U.S. equity-index futures lower before the Federal Reserve meets and euro-area finance ministers discuss Greece’s debt crisis. The euro advanced, while bond yields rose from Italy to Spain. The Shanghai Composite Index plunged 3.5 percent, while a gauge of China stocks in Hong Kong took losses since a May 26 high beyond 10 percent. Standard & Poor’s 500 Index futures dropped 0.4 percent by 8:22 a.m. in London, and the Stoxx Europe 600 Index fell 0.5 percent. The euro added 0.4 percent as the rate on 10-year Spanish debt jumped nine basis points and the yield on similar Treasuries fell two basis points. U.S. crude added 1.2 percent. Greece has no plans to present new proposals at a meeting of European finance ministers this week to unlock aid, Greek Finance Minister Yanis Varoufakis told Bild newspaper. Chinese stocks, which have soared on the back of record margin borrowing, are plunging as a rash of initial public offerings drains liquidity and pushes up money market rates. The Fed, which starts a two-day meeting Tuesday, isn’t projected to move on interest rates until at least September. “The Greece fiasco will continue to be the key noise to the financial markets,” said Mayuree Chowvikran, an investment strategist at Maybank Kim Eng Securities (Thailand) Pcl in Bangkok. “The exit of Greece from the euro zone would be the worst scenario and create huge volatility. The Greek problem may also have some impact on the Fed’s interest-rate policy decision.” Euro, ZEW European shares are extending recent losses after the Stoxx 600 dropped 2.5 percent in the previous two trading days. Eighteen of the 19 groups on Europe’s benchmark equity gauge retreated. The 19-nation euro strengthened to $1.1315. The joint currency erased a drop of as much as 0.7 percent Monday to finish 0.2 percent higher. European car sales rose at the slowest pace in six months in May, data today showed. The U.K. updates on consumer prices data Tuesday, and the ZEW survey of growth expectations in the euro region is due. The debt of countries outside the region’s core extended Monday’s slump, with Spanish 10-year yields hitting their highest since August. European Central Bank President Mario Draghi said an agreement between Greece and its creditors was needed “very soon” and that the ball lies squarely in the court of the indebted country’s government. Asia Stocks The MSCI Asia Pacific Index fell a second day, losing 0.7 percent. Japan’s Topix index declined 0.7 percent, dropping for the first time in four days. The Kospi index in Seoul slipped 0.7 percent toward a three-month low. Hong Kong’s Hang Seng China Enterprises Index retreated 2.4 percent, with its decline since May 26 meeting some investors’ definition of a correction. The Shanghai Composite Index slid 3.5 percent. After China’s biggest stock gauge more-than doubled in the last 12 months, the median price-to-earnings ratio for companies on the Shanghai Composite is 74, according to data compiled by Bloomberg. That compares with 17 for the Topix and 20 for the S&P 500. The Chinext, an index of smaller companies in the southern city of Shenzhen, capped its biggest two-day drop since December 2013. The gauge was up 165 percent this year through Friday. Kuroda Clarification The yen slid to 123.56 per dollar after Bank of Japan Governor Haruhiko Kuroda told parliament Tuesday that he didn’t mean to predict a future nominal exchange rate when discussing the yen’s weakness last week. Sixteen of 35 economists surveyed by Bloomberg see the BOJ adding to its unprecedented easing by the end of October, down from 21 of 36 in May. Crude rallied above $60 a barrel in New York amid speculation U.S. crude stockpiles will decline further, easing a supply surplus. Data on U.S. stockpiles is due Wednesday. Corn for September delivery added 0.6 percent to $3.55 a bushel following five days of declines. Soybeans rose 1 percent as wheat futures added 0.8 percent. While the Fed is expected to keep rates near zero at this week’s meeting, signs the U.S. economic recovery is on a stronger footing have pushed odds of a September increase to 53 percent. Chair Janet Yellen may provide clues on the pace of tightening when she holds a press conference June 17. Archr LLP is Authorised and regulated by the Financial Conduct Authority (FCA reference 617163). Archr LLP is not covered by the Financial Services Compensation Scheme (FSCS). Archr is registered in England and Wales No. OC371018. 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