Stocks Plunge on Concerns Over China, Confidence
A trader works on the floor of the New York Stock Exchange in New York. Photographer: JB Reed/Bloomberg
June 29 (Bloomberg) -- James Paulsen, chief investment strategist at Wells Capital Management, talks with Bloomberg's Mark Crumpton about the dip in Treasury yields and consumer confidence. Ten-year note yields dropped below 3 percent for the first time in more than a year as U.S. consumer confidence fell this month more than economists forecast. (Source: Bloomberg)
June 29 (Bloomberg) -- Thomas Tucci, head of U.S. government bond trading at RBC Capital Markets, talks about the Treasury market. Tucci, speaking with Betty Liu and Sheila Dharmarajan on Bloomberg Television's "In the Loop," also discusses the outlook for Federal Reserve monetary policy and the U.S. economy. (Source: Bloomberg)
June 29 (Bloomberg) -- Charles Bobrinskoy, director of research for Ariel Investments, speaks about the stock market and investment strategy in health-care stocks. Bobrinskoy talks on Bloomberg Television's "InBusiness with Margaret Brennan." (Source: Bloomberg)
June 29 (Bloomberg) -- Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, talks about the outlook for U.S. economy and investor sentiment. Feroli speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
June 29 (Bloomberg) -- Andrew Popper, chief investment officer at SG Hambros Bank Ltd., talks about the economic outlook for China. The New York-based Conference Board revised its leading economic index for China to show the smallest gain in five months in April, in a release that contributed to the biggest sell-off in Chinese stocks in more than a month. Popper speaks with Andrea Catherwood on Bloomberg Television's "The Pulse." (Source: Bloomberg)
June 29 (Bloomberg) -- Neil Dwane, chief investment officer for Europe at Allianz Global Investors' RCM unit, talks about the outlook for the global economy and his equities investment strategy. He speaks with Maryam Nemazeee on Bloomberg Television's "Countdown." (Source: Bloomberg)
June 29 (Bloomberg) -- Lewis Wan, chief investment officer at Pride Investments Group Ltd., talks with Bloomberg's Rishaad Salamat about Agricultural Bank of China Ltd.'s planned initial public offering and the outlook for China's banking industry. Agricultural Bank set a price range for the Shanghai part of its initial public offering that will allow it to raise as much as $20.1 billion, according to a company statement. The Beijing-based bank may offer 22.2 billion shares in Shanghai at 2.52 yuan to 2.68 yuan apiece, it said. Agricultural Bank last week priced shares in the Hong Kong part of its IPO at HK$2.88 to HK$3.48 each. Wan, speaking in Hong Kong, also discusses China's economy and stocks. (Source: Bloomberg)
June 29 (Bloomberg) -- Elon Musk, chief executive officer of Tesla Motors Inc., talks about the company's initial public offering and outlook. Tesla, the electric-car company that hasn’t posted a profit, raised $226 million selling shares above its forecast price range in the first IPO of a U.S. automaker in a half century. Musk speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Stocks sank from Shanghai to New York, with the MSCI World Index losing the most in 14 months, and two-year Treasury yields slid to a record low on concern over weakening growth in China and a slump in U.S. consumer confidence. The euro fell to an eight-year low versus the yen.
The MSCI World Index of 24 developed nations lost 3.2 percent, its biggest retreat since April 2009, as of 4 p.m. in New York. The Standard & Poor’s 500 Index slid 3.1 percent to 1,041.24, its lowest close since October, as 499 of its stocks declined. The Shanghai Composite Index tumbled 4.3 percent. The benchmark 2012 Treasury note yield slid as low as 0.5857 percent and the 10-year yield sank below 3 percent for the first time in 14 months. Oil and copper slumped at least 3 percent.
“It’s ugly out there,” said James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “Consumers are pulling back. There’s concern about a China slowdown. We’re close to important technical levels on the S&P 500, with 1,040 being closely watched. It’s end of quarter, investors have to close their books and they are selling the stocks that did poorly.”
The tumble in global stocks began after the Conference Board said its leading economic index for China rose 0.3 percent in April, less than the 1.7 percent reported June 15. Losses accelerated after the same research group’s gauge of U.S. consumer confidence slumped to 52.9 in June, below all 71 projections in a Bloomberg News survey of economists. The S&P 500 has tumbled 11 percent since the end of March, headed for its first quarterly loss in a year.
Jobs, Europe Concerns
Today’s data damaged investor confidence amid concern a Labor Department report July 2 will show the U.S. lost jobs for the first time this year, while European bank balance sheets come under heightened scrutiny as a lending facility from the region’s central bank expires.
The rate banks say they charge each other for three-month loans in euros rose to 0.688 percent in London, the highest in eight months, as institutions hoarded cash before the 12-month European Central Bank lending facility expires later this week.
European banks need to repay 442 billion euros ($540 billion) in 12-month loans to the ECB by July 1, the biggest amount ever awarded by the central bank. Demand for three-month cash from the ECB tomorrow will expose how much banks still rely on the central bank for funding, investors and economists said. The ECB will announce how much money banks have asked for at about 11:15 a.m. in Frankfurt.
‘Funding Pressures’
“Concerns about funding pressures are creeping in again,” said Alexander Titsch-Rivero, head of derivatives and structured products in Frankfurt at BHF-Bank AG, a German private bank. “Some banks seem to be concerned about the ECB’s 12-month loans expiring. Definitely some banks seem to have built up huge bond positions financed with this one-year ECB tender. Now you have a roll-over gap and that seems to make people nervous.”
The S&P 500, the benchmark gauge for U.S. stocks, retreated for the sixth time in seven days and has plunged 14 percent from its 2010 high in April amid concern that Europe’s government debt crisis and slowing growth in China will derail the global recovery.
Today was the first day only one S&P 500 stock rose since Sept. 29, 2008. Zimmer Holdings Inc., a maker of medical implants and other surgical products, climbed less than 0.1 percent after Goldman Sachs Group Inc. advised buying the shares and said the market its underestimating the company’s long-term growth potential.
Verizon iPhone
Verizon Communications Inc. slipped 0.3 percent for the third-best performance in the S&P 500 after Bloomberg News reported that Verizon Wireless will start selling Apple Inc.’s iPhone next year, according to two people familiar with the plans.
The S&P 500’s decline today was its largest in three weeks and pushed the gauge to its lowest intraday level of the year, heightening the risk of bigger losses, according to analysts who watch chart patterns.
The S&P 500 fell as much as 3.7 percent to 1,035.18 today, below the May 25 level of 1,040.78 that had been its weakest level of the year.
“Fear and negativity is pervasive,” said Andrew Ross, partner and global equity trader for First New York Securities LLC. “No one wants any long exposure going into the U.S. employment data and we are a witnessing a confluence of some very ugly market factors. The result is pretty extreme risk aversion, best evidenced in treasury yields.”
Dow Below 10,000
Boeing Co., Alcoa Inc. and Caterpillar Inc. tumbled at least 5.5 percent to lead losses in all 30 Dow Jones Industrial Average companies as the gauge slid 268.22 points to 9,870.3, its first trip below 10,000 in more than two weeks.
Tesla Motors Inc., the electric car company that hasn’t posted a profit, jumped 41 percent after raising $226 million in the first initial public offering of a U.S. automaker in a half century.
All 10 industry groups in the MSCI World Index declined at least 1.9 percent, led by basic-materials producers and financial companies. The gauge has lost 10 percent this year. The MSCI Asia Pacific Index dropped 1.5 percent today as Japan’s unemployment rate unexpectedly increased.
The New York-based Conference Board cited a calculation error for the revision in its Chinese indicators index. The research group’s outlook for the nation’s economy hasn’t been affected by the correction, said William Adams, the group’s resident economist in Beijing.
“Growth was not likely to accelerate in China, and in fact, a moderation is possible,” Adams said in a telephone interview. “This correction also supports the same view.”
Treasuries Rally
The yield on the two-year note pared its loss to two basis points, leaving it at 0.61 percent. The yield on 10-year Treasury security slid 7 basis points to 2.95 percent, the lowest since April 2009. Treasuries have climbed 5.7 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. The 10-year Australian bond yield dropped nine basis points to 5.13 percent, and the yield on the 10-year German bund retreated three basis points to 2.55 percent.
Indicators of corporate bond risk in the U.S. and Europe rose. The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or speculate on creditworthiness, climbed 6 basis points to a mid-price of 122.5 basis points as of 4:38 p.m. in New York, the highest since June 14, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of swaps on 125 companies with investment-grade ratings increased 8.91 to 133.44, the biggest rise since June 7, Markit prices show.
Yen, Dollar
The yen appreciated against all 16 major currencies and the dollar strengthened against 14 on demand for assets perceived to be the safest. Japan’s currency appreciated 1.6 percent to 107.93 per euro and touched 107.32 yen per euro, the strongest since November 2001.
Metals declined for the first time in four sessions on the London Metal Exchange, led by declines of more than 7 percent in zinc, nickel and lead. Copper fell 4.5 percent to $2.9505 a pound in New York, extending its decline this year to 13 percent. Oil for August delivery slumped the most in three weeks, losing 3 percent to $75.94 a barrel on the New York Mercantile Exchange.
The MSCI Emerging Markets Index fell 3 percent, the most since May 25, extending this year’s drop to 6.7 percent. Brazil’s benchmark Bovespa index sank 3.5 percent, the most since February.
The Stoxx Europe 600 Index tumbled 3 percent as Rio Tinto Group, the world’s third-biggest mining company, plunged 6.4 percent on concern demand from China may weaken. BP Plc lost 1.7 percent in London, bringing its decline since an April explosion on the Deepwater Horizon rig to 54 percent.
The cost of insuring BP’s debt approached a record, with credit-default swaps increasing 10 basis points to 594 as of 12:58 p.m. in New York, according to CMA DataVision, a London- based credit information provider. The contracts closed at an all-time high of 588.6 on June 25 and traded at a record of 620 on June 16.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.
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