Australian stocks declined for a third day as Cyprus rejected a bank-deposit levy needed to secure European bailout funds, sparking a standoff that risks reigniting the region’s debt crisis. U.S. equity futures fell.
BHP Billiton Ltd., the world’s largest mining company, declined 2.7 percent in Sydney, as metals prices retreated for a third day. Rio Tinto Group (RIO) dropped 2.7 percent as Goldman Sachs Group Inc. analysts said slower growth in steel demand will weigh on iron-ore prices. David Jones Ltd. (DJS), Australia’s second- largest department store chain, rose 3.9 percent as profit topped estimates.
Australia’s S&P/ASX 200 Index (AS51) retreated 0.7 percent to 4,950.80 as of 10:19 a.m. in Sydney. The gauge has fallen for six of the past seven trading days after reaching the highest level in almost five years on March 11. New Zealand’s NZX 50 Index rose 0.3 percent. Japanese equity markets are closed today for a holiday.
“Confidence is shot,” said Chris Bertelsen, chief investment officer at Global Financial Private Capital, a Sarasota-based private wealth firm with about $1.7 billion in assets under management. “It’s a major shot across the bow in terms of the faith investors have in European policy makers. It’s going to continue to affect global markets going forward and is a good reason for the market, that had been pretty giddy, to have a bit of a correction.”
Australia’s benchmark climbed 7.3 percent this year through yesterday as improving economic data from the U.S. and speculation that central banks from Japan to Europe and the U.S. will continue to deploy stimulus countered concern over China’s efforts to rein in property prices.
That pushed valuations on Australia’s benchmark to 15.2 times average estimated earnings yesterday compared with 14 for the Standard & Poor’s 500 Index (SPX) and a multiple of 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Futures on the Standard & Poor’s 500 Index fell 0.3 percent. The S&P 500 dropped 0.2 percent yesterday, sending the gauge to its longest slump of the year, as Cyprus lawmakers rejected an unprecedented levy on bank deposits, dealing a blow to European plans to force savers to shoulder part of the country’s bailout.
Hammered out by euro-area finance chiefs at the weekend, the deal had sought to raise 5.8 billion euros ($7.5 billion) by drawing funds from Cyprus bank accounts in return for 10 billion euros in international aid. While the Mediterranean island nation accounts for less than half a percent of the euro economy, the fight over the bank tax risks triggering new turmoil in the financial crisis that began in 2009 in Greece.
The Federal Open Market Committee will conclude a two-day meeting today. The policy makers agreed in December to link record-low interest rates to thresholds for unemployment and inflation so that investors and households know what conditions will prompt the Federal Reserve to consider raising rates.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. dropped 0.8 percent in New York yesterday to a four-month low. China Mobile Ltd. led a retreat among phone operators. Solar-panel maker Suntech Power Holdings Co. extended declines to a second day after defaulting on a bond payment.
The Shanghai Composite Index (SHCOMP) will rebound this week to resume a rally from a December low that will leave it 48 percent higher within the next six months, according Tom DeMark, the founder of Market Studies LLC.
The Shanghai Composite, which closed at 2,257.43 yesterday, will resume the rally once it falls below 2,232 today or tomorrow, DeMark said. The Paradise Valley, Arizona-based creator of indicators to show turning points in securities said Feb. 6 that the measure would decline about 8 percent to within a range of 2,230 to 2,250 before rebounding. The index was down 8 percent from when he made the call to the March 18 close of 2,240.02.
The London Metal Exchange Index (LMEX) of industrials metals fell 0.4 percent, a third day of declines.
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