Commodities Fall With Chinese Shares on Spending Cuts, PMI Data
By Glenys Sim - Feb 28, 2013 9:31 PM PT
Commodities fell for a fourth day and Chinese shares slid as $85 billion of American spending cuts were set to begin and data showed Chinese manufacturing weakened. Japanesegovernment bonds surged and the yen weakened after a report showed lingering deflation.
The Standard & Poor’s GSCI Index of 24 raw materials dropped 0.2 percent as of 2:24 p.m. inTokyo, set for a fourth week of declines in the longest streak since June. Copper lost 0.6 percent and oil fell 0.2 percent. The Shanghai Composite Index of shares sank 1.2 percent, S&P 500 Index (SPX) futures dropped 0.1 percent and FTSE 100 Index contracts slipped 0.3 percent.Japan’s 10-year bond yields sank to an almost 10-year low, while the yen weakened against major peers.
A pedestrian walks past an electronic stock board outside a securities firm in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg
China’s manufacturing slowed for a second month, Japan’s consumer prices dropped for the eighth time in nine months, and South Korea’s exports fell the most since July. The U.S. Senate rejected a pair of partisan proposals to replace the automatic across-the-board spending reductions which theInternational Monetary Fund says will hurt global growth. Data today may confirm Europe’s manufacturing contraction worsened.
“The Chinese data shows the economy is still expanding, the recovery is still on track, but clearly the momentum is not as strong as in previous cycles,” Yao Wei, Societe Generale SA’s China economist, said on Bloomberg Television’s “On the Move” with Rishaad Salamat. “It does show that there are still a lot of underlying structural problems with the economy.”
The dollar led gains in world markets last month, beating global measures of bonds,stocks and commodities , as the threat of U.S. budget cuts proved no barrier to investors snapping up American assets. Japan overtook China last year as the largest foreign holder of U.S. securities, including equities, asset- backed debt and Treasuries, the U.S. Treasury Department said.
Asian Stocks
The MSCI Asia Pacific Index of shares fluctuated while Japan’s Topix Index gained 0.7 percent, heading for the highest close since 2010. Australia’s S&P/ASX 200 Index and Hong Kong’sHang Seng Index both declined 0.4 percent. South Korean markets are closed for a holiday today.
Chinese shares declined before the start of the National People’s Congress next week. ThePurchasing Managers’ Index was 50.1 in February, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today, compared with the 50.5 median estimate in a Bloomberg News survey and 50.4 in January. A separate PMI for China released today by HSBC Holdings Plc and Markit Economics was at 50.4 for February.
Spending Cuts
U.S. stocks erased gains in the final minutes of trading yesterday as investors prepared for rebalancing of benchmark indexes and spending cuts. The IMF, which currently expects 2 percent growth for the U.S. this year, will lower its forecasts for the world’s biggest economy because of the spending reductions, a spokesman said yesterday.
“In the near term we’re probably going to see markets struggling because of certain risks,” John Praveen, the chief investment strategist at Prudential International Investments Advisers, said on Bloomberg Television’s “Asia Edge.” “The U.S. sequester is clearly a risk and you have other risks in Europe. Strategically we remain quite bullish and after this period of correction, we should probably see another liquidity- driven rally especially in Japan.”
In Japan, benchmark 10-year bond yields touched 0.64 percent, the lowest since June 2003. The Bank of Japan (8301) may add monetary stimulus as early as April as prospective governorHaruhiko Kuroda looks to demonstrate a more aggressive approach to tackling 15 years of falling prices. The yen dropped 0.1 percent to 92.61 per dollar and 0.2 percent to 121.13 against the euro.
Euro, Commodities
The euro was poised for its longest stretch of weekly declines since June as European Central Bank President Mario Draghi said this week the bank is “far” from exiting stimulus measures. The final reading of a manufacturing gauge in the region fell to 47.8 in February from 47.9 in January, economists estimated before data today.
Commodities as measured by the S&P GSCI sank 4 percent in February, the worst monthly performance since October. Copper in London retreated for a second day, falling to $7,765.50 a metric ton, on concern China’s economic recovery may be losing steam. Nickel slipped 0.3 percent and aluminum lost 0.35percent.
Platinum for immediate delivery declined 0.5 percent to $1,575.25 an ounce, dropping for a third day. Palladium fell 0.4 percent to $725.70 an ounce. Gold lost 0.1 percent, reversing a 0.3 percent advance.
Oil in New York slid as much as 62 cents to $91.43 a barrel, the lowest intraday price since Dec. 31. Prices are headed for the first back-to-back weekly declines since November. Crude output by the Organization of Petroleum Exporting Countries is set to increase for the first time in six months, a Bloomberg survey showed.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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