Stocks around the world fall on economy concern
Stocks fell around the world, the yen and the dollar advanced and Treasuries rose as investors speculated that a rally in riskier assets has outpaced the prospects for economic growth.
The MSCI World Index of 23 developed nations sank 1.5 percent at 10:12 a.m. in London, the biggest retreat in a month. Futures on the Standard & Poor’s 500 Index slid 2 percent, while China’s Shanghai Composite Index slumped the most since November. The yen strengthened against all 16 of the most-traded currencies tracked by Bloomberg, while the dollar advanced against every one except the yen. The yield on the benchmark 10- year Treasury note dropped to its lowest level this month. Copper and oil declined for a second day.
Equities tumbled after a government report showed Japan’s economy grew less than economists estimated in the second quarter, reigniting concern that a five-month, 52 percent rally in the MSCI World was overdone. The tally of failed U.S. banks this year climbed to 77 last week, while the Reuters/University of Michigan preliminary index of consumer sentiment in America showed an unexpected decrease.
“The rally in risk assets has become overextended as it has run ahead of the improvement in fundamentals,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in an e-mailed report. “The dollar and yen have been boosted by a pickup in safe-haven demand.”
The Dow Jones Stoxx 600 Index of European shares retreated 2 percent, the biggest drop in a month. A 42 percent rebound since March 9 has left the regional measure valued at 40.2 times the profits of its companies, near the most expensive since September 2003, data compiled by Bloomberg show.
Commodities producers declined with metals and oil. Rio Tinto Group, the world’s third-largest metals producer, decreased 3.8 percent in London.
The MSCI Asia Pacific Index lost 3.1 percent, the biggest decline since March. Japan’s gross domestic product expanded at an annual 3.7 percent pace in the three months ended June 30, missing the median economist estimate for a 3.9 percent increase.
China’s Shanghai Composite Index sank 5.8 percent, the steepest slump since Nov. 18, as foreign direct investment plunged, Ping An Insurance (Group) Co.’s profit missed estimates and Yunnan Copper Industry Co. said there are “no clear signs” of a recovery.
The MSCI Emerging Markets Index declined 3 percent, the steepest drop since March. Russia’s ruble weakened 2 percent against the dollar and depreciated 1.1 percent against the euro.
The yen advanced the most against the Australian dollar, strengthening 2.3 percent, and rose 1.1 percent to a two-week high against the euro as demand for higher-yielding currencies waned. The pound slid 1.1 percent against the dollar to its weakest level since July 22 on growing evidence the U.K.’s sputtering economy is halting the currency’s biggest five-month rally in 24 years.
Gains for Treasuries sent the yield on the benchmark 10- year note down 7 basis points to 3.50 percent, the lowest level since July 31. The 30-year yield lost 5 basis points to 4.38 percent.
The cost of protecting European corporate bonds from default rose to the highest since July 23 in the market for credit-default swaps. The Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 4.25 basis points to 99, according to JPMorgan Chase & Co. prices.
Copper for delivery in three months fell as much as 3.9 percent to $6,000 a metric ton on the London Metal Exchange, the steepest drop since June 22. Aluminum, nickel and zinc also declined. Crude oil retreated 2.5 percent to $65.82 a barrel in New York. Gold fell 1.1 percent to $938.32 an ounce, leading a decline in precious metals.