Emerging-market stocks and U.S. index futures fell, while Treasuries gained with bunds as data showing the biggest slump in German exports since 2009 underscored concerns raised by the International Monetary Fund about the fragility of the global recovery. Deutsche Bank AG fluctuated after the firm’s biggest quarterly loss in at least a decade.
The MSCI Emerging Markets Index fell after its highest close since Aug. 20, while U.S. futures headed lower. The Shanghai Composite Index advanced 3 percent after a week-long holiday during which Hong Kong’s Hang Seng China Enterprises had rallied 11 percent. U.K. gilts climbed with U.S. and German notes before a Bank of England policy meeting. Oil traded near $48 a barrel. Deutsche Bank erased a drop of as much as 3.6 percent in Frankfurt.
HSCEI, H shares, Shanghai Composite
“The rally doesn’t have legs,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “Fundamentally, the picture doesn’t look that good especially with the IMF downgrading the global forecast for this year. The only thing holding up this rally is speculation we will get more stimulus measures and that’s not a good sign.”
Germany’s statistics office said exports plunged 5.2 percent in August, a day after theInternational Monetary Fund downgraded its economic outlook, citing concerns about how emerging markets will fare as the Fed tightens. Hong Kong shares surged during China’s holiday after mainland policymakers cut mortgage requirements and some taxes on car sales. Hopes for further stimulus from Japan and China to Europe, and the prospects for a delay in the Federal Reserve’s liftoff, have helped riskier assets stage a rebound after a miserable third quarter.
Stocks
The MSCI Emerging Markets Index fell 0.6 percent by 8:51 a.m. in London, while the MSCI Asia Pacific Index dropped 0.4 percent in its first decline since Sept. 29. Hong Kong shares weighed on the gauge after mainland Chinese equities returned to trading with less exuberance than some investors had expected.
The Stoxx Europe 600 Index fluctuated. The FTSE 100 Index edged higher as the Bank of England meets to decide rates. All 41 economists surveyed by Bloomberg predicting policy makers will stand pat and leave the base rate at 0.5 percent. Minutes of the European Central Bank’s last policy meeting are also due.
Deutsche Bank AG shares swung to a gain of 1.8 percent after co-Chief Executive Officer John Cryan unveiled the loss and hinted at the elimination a dividend that’s stood since Germany’s postwar reconstruction. Write-downs may hurt bonuses as the lender weighs cutting thousands of jobs.
Standard & Poor’s 500 Index futures dropped 0.5 percent, after a 0.8 percent increase in the U.S. benchmark Wednesday, its sixth advance in seven days. The MSCI All-Country World Index was little changed after capping a six-day, 6.9 percent climb on Wednesday.
Japan’s Topix index retreated 0.8 percent while the S&P/ASX 200 Index in Sydney added 0.2 percent. New Zealand’s S&P/NZX 50 Index fell 0.4 percent in Wellington. The Kospi index in Seoul ended 0.7 percent higher.
“The momentum tells us that the August-to-September downtrend is still in control of global markets,” Evan Lucas, a markets strategist at IG Ltd. in Melbourne, said in an e-mail to clients. “Stocks with high discounts that are seeing an easing in the top-down pessimism thematic are looking attractive as a buying opportunity. But be on the lookout for the second leg of the downturn.”
Hong Kong’s Hang Seng Index fell 0.7 percent and the Hang Seng China Enterprises Index dropped 1.2 percent. The Shanghai Composite finished trading on Sept. 30 at a level 41 percent below its June 12 closing high.
The CSI 300 Index of shares in Shanghai and Shenzhen added 2.9 percent to 3,296.48. Goldman Sachs Group Inc. cut its 12-month outlook for the CSI 300 by 20 percent to 4,000 from 5,000, citing concerns about more moderate liquidity, still-recovering investor sentiment and a “harsher” economic environment.
China faces a “delicate” task in shifting to more consumption-driven growth without exposing the weaknesses of highly indebted companies and banks saddled with rising non-performing loans, the IMF said Wednesday in its Global Financial Stability Report. High debt levels at banks and other companies have left developing economies susceptible to financial stress and capital outflows, just as the Fed prepares to raise interest rates for the first time since 2006, the fund said.
The Lyxor ETF Brazil Ibovespa slipped 2.3 percent in Paris. A court in Brazil recommended Congress reject government accounting practices for the first time since 1937. The decision could be used as a legal justification to impeach President Dilma Rousseff. Emerging-markets investor Mark Mobius also said he is looking for opportunities in the country’s equity market, which has slumped more than 15 percent from its 2015 peak.
Currencies
The euro advanced 0.5 percent to $1.1289, while the yen strengthened 0.2 percent to 119.79 per dollar and the Swiss franc added 0.5 percent. Russia’s ruble, Hungary’s forint and Poland’s zloty gained at least 0.3 percent.
The Australian dollar slipped 0.4 percent to 71.82 U.S. cents after climbing to its highest level since Aug. 21 amid a rebound in commodities and speculation that the economic outlook for China, the country’s biggest trading partner, may be brightening as the government unveils further steps to boost consumption.
Indonesia’s rupiah weakened 0.3 percent to 13,860 per dollar. The currency surged 6.1 percent in the four days through Wednesday, the biggest such gain since December 2008. The gains helped propel a rebound in a gauge of 20 emerging market currencies.
Bonds
U.S. Treasuries rallied, with yield on 10-year notes dropping three basis points to 2.04 percent. The U.S. attracted the strongest demand in more than four years from a class of buyers that includes mutual funds at a $21 billion auction of 10-year notes Wednesday.
Morgan Stanley, one of the 22 primary dealers that trade directly with the Fed, says its clients began discussing the possibility that central bankers will resume bond purchases -- or cut interest rates to below zero -- after a weaker-than-forecast U.S. employment report last week. The firm recommends buying medium-term Treasuries.
Germany’s 10-year notes rallied, with the yield slipping two basis points to 0.57 percent. The rate on similar-maturity U.K. gilts dropped three basis points.
A Japanese auction of 30-year notes attracted the strongest demand since March on Thursday. The average yield dropped to 1.350 percent, the lowest since a sale in January, from 1.412 percent on Sept. 8. Rates on the country’s 10-year notes were little changed.
Commodities
Silver for immediate delivery slumped 2.3 percent to $15.69 per ounce, snapping a four-day 11 percent advance. The precious metal closed above its 200-day moving average for the first time since May on Wednesday, a day after erasing this year’s losses, amid mounting speculation that the Federal Reserve will put off tightening monetary policy this year.
source: Bloomberg
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