(Bloomberg) — Stock fell in Europe and Asia, ending a two- day rally amid renewed concern over higher U.S. interest rates and China’s economic slowdown. The yen swung to a loss.
The Stoxx Europe 600 Index fell and Japan’s Nikkei 225 Stock Average gave back some of Wednesday’s 7.7 percent surge.
The Shanghai Composite Index retreated as producer prices plunged by the most since 2009. New Zealand’s dollar tumbled after the central bank cut rates, while Japan’s yen dropped after an aide to Prime Minister Shinzo Abe said October would be a “good opportunity” for the central bank to boost stimulus.
The global stock rally that began in the final hour of Tuesday trading in Shanghai faltered after just 33 hours, as data showing record U.S. job openings supported the case for higher interest rates. China’s Premier Li Keqiang said the country still has “sufficient capability to respond” if growth falls below a reasonable range. His comments came as August producer prices tumbled 5.9 percent in a 42nd straight month of retreat. Standard & Poor’s cut Brazil’s credit rating to junk on growth concerns.
“Markets will remain volatile until the Fed meeting next week,” Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney, which oversees about $118 billion, said by phone. “Investors are again focusing on the potential U.S. interest rate increase and how it would impact emerging markets.”

Stocks

The Stoxx 600 fell 1.1 percent by 8:20 a.m. in London, with all 19 industry groups sliding after Europe’s benchmark stock gauge closed at its highest since Aug. 20. The MSCI Asia Pacific Index sank 1.7 percent, retracing some of Wednesday’s 4.2 percent jump. The measure fell to its lowest close since November 2012 on Monday.
Futures on the Standard & Poor’s 500 Index added 0.4 percent after a 1.4 percent drop in the gauge last session.
Equities had begun the day higher amid a global rally as China’s markets climbed on stimulus bets andstocks in Tokyo staged the biggest surge since 2008.
Odds that the Fed will pull the trigger on rate hikes at its Sept. 16-17 meeting have held at 28 percent this week, with the chance of an increase in December now at 57.5 percent, according to Fed funds futures tracked by Bloomberg.
Japan’s Topix index dropped 1.9 percent, following U.S.
stocks lower. The Nikkei 225 dropped as much as 4.3 percent before finishing 2.5 percent lower. The yen weakened as much as
0.4 percent as ruling Liberal Democratic Party lawmaker Kozo Yamamoto, who has advised Abe on economic policy, said the Bank of Japan should increase annual pace of asset purchases by at least 10 trillion yen ($83 billion).
The Hang Seng China Enterprises Index slipped 2.4 percent after a two-day, 9.6 percent surge that was the biggest since October 2011. The Shanghai Composite retreated 1.4 percent after back-to-back gains that had bolstered optimism the government will be able to engineer a soft landing for the nation’s markets and the wider economy.
Thursday’s factory-gate price data showed deflation is pushing up real borrowing costs for the industrial sector, compounding challenges as the growth outlook dims. The Shanghai Composite has tumbled 39 percent from its June high to erase $5 trillion in value on mainland bourses as leveraged investors fled amid signs of a deepening slowdown in the economy.
A Tokyo exchange-traded fund tracking Brazilian shares retreated 4.1 percent Thursday. The country’s rating was reduced one step to BB+, with a negative outlook, S&P said in a statement after markets closed. Shares of Petroleo Brasileiro SA, the state-controlled oil company, tumbled as much as 8.4 percent in German trading.
(For more news on stocks, see TOP STK.)

Currencies

New Zealand’s currency sank 1.9 percent to 62.75 U.S.
cents. The kiwi earlier sank as much as 2.2 percent versus the dollar, bringing its drop in the year to almost 20 percent.
Reserve Bank of New Zealand Governor Graeme Wheeler said further monetary policy easing seems likely and that more weakness in the currency would be appropriate. South Africa’s rand weakened
0.6 percent.
The yuan fell as much as 0.12 percent to this month’s low after the People’s Bank of China weakened its reference rate for the currency by the most in four weeks.
The Markit iTraxx Asia index of credit-default swap prices climbed four basis points to 138.5 basis points, Australia & New Zealand Banking Group Ltd. prices showed. The gauge is set for its biggest one-day jump since Sept. 1 and its highest close since Sept. 7, according to data provider CMA.
(For more news on currencies, see TOP FX.)

Commodities

Copper for three-month delivery erased a drop to climb 0.2 percent in London, after soaring almost 5 percent over the past three days. Nickel added 0.7 percent. China is the world’s biggest consumer of industrial metals and gains in the nation’s equities had bolstered copper earlier in the week.
West Texas Intermediate crude extended declines, falling
0.1 percent after sinking as much as 4.1 percent on Wednesday.
Brent oil retreated 0.5 percent to $47.33 after also losing 3.9 percent. Analysts are predicting a 900,000-barrel increase in U.S. crude stockpiles in a report due from the Energy Information Administration Thursday, data that could fuel concern over the global supply glut in oil.

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