Stocks Drop as Commodities Decline
Stocks and commodities dropped as reports showed that manufacturing in China and the euro area has slowed. The yen, meanwhile, strengthened and shares in Europe continued to drop for the third day in a row in the midst of new clashes in Ukraine.
The MSCI All-Country World Index dropped 0.6%. The S&P 500 Index futures dropped 0.2%, and the MSCI EM Europe Index fell by 0.9%. Japan’s currency strengthened and climbed 0.5% against the euro and 0.3% against the dollar. The S&P GSCI gauge fell by 0.6 % and so did copper.
China’s manufacturing dropped to a seven-month low, while the euro region also unexpectedly dropped. At least seven more people have died in fresh clashes as the truce declared last night by the Ukrainian President Viktor Yanukovych and opposition leaders struggled to gain a foothold.
The weakness currently seen in equities is mainly due to the uncertainty in the outlook for emerging markets. The Stoxx Europe 600 Index dropped by 0.7%. Trading volumes were 15% less than the 30-day average. BAE Systems Plc fell 8.3% after Europe’s largest arms manufacturer said that profit will drop as much as 10% this year. TUI AG fell 5.2% as Monteray Enterprises Ltd. started to sell a 15.7% stake in the company. Banco Popolare SC also dropped by 2.4% after S&P lowered its credit ratings on the popular Italian lending company.
However, Technip SA rose by 8.1% after the company confirmed its forecast earnings for the current year and the next. Suez Environnement Co. also did rather well posting a 7.3% rise after reporting that its net debt declined in 2013.
Facebook surprisingly lost 2.3% in trading after acquiring WhatsApp Inc. for $19 billion in cash and stock. Wal-Mart dropped by 1.7% after its forecasted earnings per share in the first quarter were less than projected.
Jobless claims fell by 3,000 to end at 336,000 which is ontrack with the median forecast of 335,000.
The ongoing risks of prolonged economic turmoil in emerging markets and of deflation in the euro area due to recent violent clashes are threatening the improvement in global economic prospects.
Copper dropped down to about $7,141 a metric ton and lead also dropped by 0.9%. China is the largest buyer of industrial metals. But the recent market slowdown in China has led to a drop in the purchase of these materials. Gold fell by 0.1% back to around $1,310 an ounce. The S&P GSCI showed signs of weakening and ended its seven day winning streak, its longest in over six months.
Treasuries fell on Wednesday, when minutes from the latest meeting of the Federal Reserve were released. The minutes revealed that the policy-makers will in most probability not change their mind regarding the plans to scale back the tapering of bond purchases. The US also has plans to sell $9 billion of its 30-year Treasury Inflation Protected Securities today.