 the fact that no one is concerned is EXACTLY WHATCONCERNS ME...
Stocks Fall With China in Bear Market as Bonds Decline
By Richard Frost and Stephen Kirkland - Jun 24, 2013
Stocks fell with Chinese equities entering a bear market on concern a cash crunch will hurt the economy. Bonds dropped around the world on mounting speculation the U.S. will begin curbing stimulus, while commodities declined and the dollar strengthened.
The MSCI All-Country World Index lost 0.7 percent to 349.05 at 10:45 a.m. in London. The CSI 300 Index (SHSZ300) of China’s biggest companies tumbled 6.3 percent, the most since August 2009and taking its decline from this year’s peak to more than 20 percent. Standard & Poor’s 500 Index (SPA) futures sank 0.6 percent. The S&P GSCI gauge of 24 raw materials dropped 0.3 percent as copper declined to a two-year low. Ten-year Treasury note yields rose to the highest level since August 2011 as rates jumped from Australia to Germany. The Dollar Index added 0.3 percent.
China’s central bank said there’s a reasonable amount of liquidity in the financial system and urged banks to control risks from credit expansion, signaling no relief from a cash squeeze. The nation’s overnight repurchase rate is 6.47 percent, more than double this year’s average. U.S. durable goods orders probably rose and house prices continued to recover, economists said before reports this week, adding to the Federal Reserve’s case to scale back U.S. monetary stimulus later this year.
“What we’re seeing is a shift in the policy agenda of China which will take place in the next six to nine months,” James Bevan, chief investment officer at CCLA Investment Management Ltd. in London, told Francine Lacqua on Bloomberg Television. “During that period, we will have continued volatility and continued uncertainty, but we’ll have a real focus on exporting companies and a real appetite to constrain the domestic bubble that was property.”
Fed Stimulus The MSCI All-Country World Index sank the most in more than a year last week after Fed Chairman Ben S. Bernanke said bond buying may be scaled back this year should risks to the U.S. economy continue to decrease. The Fed may cut its monthly bond buying by $20 billion to $65 billion in September, according to economists surveyed by Bloomberg.
The Stoxx Europe 600 Index slipped 1.1 percent, declining for a fifth day in the longest losing streak in 13 months, extending the retreat from the May 22 high to more than 10 percent.
Erste Group Bank AG slid 6.9 percent as Austria’s biggest lender said it will sell about 660 million euros ($865 million) of new shares in the third quarter to help repay state aid.
Higher Volume The volume of shares changing hands in Stoxx 600 companies was 46 percent greater than the 30-day average, according to data compiled by Bloomberg. The VStoxx Index of options prices on the Euro Stoxx 50 Index, a gauge of equity volatility, climbed 7.5 percent to the highest level since February.
The decline in S&P 500 futures indicated the U.S. gauge will extend last week’s 2.1 percent retreat.
The MSCI Emerging Markets Index fell for a fifth day to a one-year low, losing 1.4 percent. Benchmark gauges in India, South Africa, the Czech Republic, the Philippines, Thailand and Indonesia losing at least 1 percent.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 3.2 percent. The Shanghai Composite Index, which tracks the largest mainland market, tumbled 5.3 percent, with trading volume 11 percent higher than the 30-day average. Goldman Sachs Group Inc. cut its 2013 forecast for China’s economy and said the cash squeeze is hurting growth.
Chinese banks must control liquidity risks from fast capital expansion, especially credit, the central bank said in a statement dated June 17 and issued today, signaling no relief to a cash squeeze which risks exacerbating an economic slowdown.
‘Credit Binge’ “ China has had a credit binge for way too long,” Vasu Menon, the head of content and research at OCBC Bank Ltd. in Singapore, told Bloomberg TV. “The government is trying to rebalance the economy, trying to downsize the shadow banking system. All that means credit is going to remain fairly tight.”
The S&P GSCI dropped to a two-month low, and aluminum fell for a 13th day, the longest slump since at least 1987. Copper lost as much as 3 percent to $6,613 a metric ton, the lowest since July 21, 2010, and aluminum dropped to the lowest since July 2009. Gold declined 1.1 percent to $1,282.59 an ounce after Goldman Sachs lowered its price forecasts through 2014 in anticipation of reduced quantitative easing by the Fed. West Texas Intermediate oil declined 0.2 percent to $93.48 a barrel.
Ten-year Treasury yields extended the biggest weekly increase in a decade, rising nine basis points to 2.62 percent. The yield on Australia’s 10-year government bond surged 28 basis points to 4.03 percent, reaching the highest since April 2012. Germany’s 10-year bund yield rose eight basis points to 1.81 percent, a 14-month high.
Gilt Yields U.K. 10-year yields reached 2.50 percent, the highest in almost 20 months, and Switzerland’s 10-year rate exceeded 1 percent for the first time since Oct. 31, 2011.
Volatility in Treasuries, as measured by Bank of America Merrill Lynch’s MOVE index, climbed to 103.73 on June 21, according to the latest available data, the highest since Nov. 23, 2011. It has averaged 61.11 this year.
The cost of insuring against losses on corporate bonds rose to the highest since Nov. 19. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies surged 4.8 basis points to 129.1.
The Dollar Index, a gauge of the U.S. currency against six major peers, rose as much as 0.5 percent to 82.742, the highest level since June 5.
Australia’s dollar declined 0.4 percent to 91.81 U.S. cents after reaching its weakest level since September 2010. The ringgit retreated 0.6 percent to 3.2195 per dollar, the lowest level since July 2010.
The JPMorgan Global FX Volatility Index increased to 11.75 percent, the highest level since June 2012. The average in the past year is 8.66 percent.
To contact the reporters on this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net;
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net |
