Commodities fell to a nine-month low, led by the worst plunge in gold since 1980, and global stocks slid the most since June as China’s economic growth unexpectedly slowed and investors speculated hedges against inflation were unneeded. The yen and dollar climbed against most major peers and Treasuries rose.
The Standard & Poor’s GSCI gauge of 24 raw materials dropped 2.3 percent, its worst loss since November, as silver tumbled more than 13 percent during the day and gold futures plunged as much as 11 percent. Oil sank to less than $89 a barrel and copper declined to the lowest level since 2011. The MSCI All-Country World Index tumbled 1.8 percent and the S&P 500 Index sank 2.3 percent for its biggest decline since November. The Shanghai Composite Index capped a 10 percent retreat from this year’s peak and Japan’s currency appreciated against all 16 major peers, while the dollar gained versus 13.
While stocks extended losses as explosions rocked the finish line area of the Boston Marathon, almost all of the decline came before the incident. China’s economic growth lost momentum as factory output weakened last month, according to data from the National Bureau of Statistics in Beijing. Manufacturing in the New York region expanded less than projected in April, according to a report from the Federal Reserve Bank of New York.
“There’s a lot of talk about when the Fed might pull back and inflation worries, but underlying -- the way the market is behaving with commodities and gold -- it seems like people are acting differently,” Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said by telephone. The firm manages $3.9 billion. “They’re acting as if deflation is still potentially a fear.”
Gold futures have tumbled almost 15 percent in two days amid speculation Cyprus will sell the metal to raise cash and the U.S. Fed will scale back on stimulus efforts, curbing the outlook for inflation. A bigger-than-forecast 0.6 percent drop in producer prices in March, reported by the government last week, was the latest sign that inflation was not posing a threat.
The losses spurred speculation that some investors were selling to raise cash to cover positions acquired with borrowed money.
“Gold took a beating today because of margin calls” expected on the Comex, Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The Chinese number was the final nail on the head with people exiting from all commodities, including gold.”
The S&P GSCI fell to the lowest since July after gold for June delivery traded as low as $1,348.50 an ounce, the least since 2010. Oil in New York slipped 2.8 percent to $88.71 a barrel, the lowest price of the year, and copper declined 2.3 percent to $3.273 a pound, the least since October 2011.
Silver tumbled as much as 13 percent, extending its 6 percent drop on April 12.
The Chicago Board Options Exchange Gold ETF Volatility Index, which measures the cost of options on the SPDR Gold Trust exchange-traded fund, soared 62 percent to 34.48 for its biggest gain on record and its highest close since October 2011. The VIX, as the CBOE’s index of S&P 500 options is known, jumped 43 percent to 17.27 for its biggest advance since August 2011.
Gold futures may fall to $1,310 in June even as the worst of the selling is over, Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Inc., said in a telephone interview. Prices will drop as inflation worries ease and amid speculation the U.S. will end its third round of stimulus measures.
Hedge funds and other speculators added to bullish gold bets before the metal slumped into a bear market and Goldman Sachs Group Inc. warned the retreat is accelerating after the longest rally in nine decades.
The investors increased net-long positions by 19 percent to 56,084 futures and options in the week ended April 9, the first gain in three weeks, U.S. Commodity Futures Trading Commission data show. That contrasts with a 7.9 percent decline in bullish wagers across 18 U.S.-traded raw materials, which fell to a five-week low of 431,581 contracts. Holdings in agriculture dropped to the lowest since September 2006.
The turn in the gold cycle is quickening and investors should sell the metal, Goldman Sachs said in an April 10 recommendation that returned 5.4 percent in three days.
Ten-year U.S. Treasury yields decreased three basis points to 1.69 percent, the lowest level since Dec. 11. Powerful explosions killed two and injured 23 near the finish of the Boston Marathon, police said.
The explosions “are giving Treasuries a boost and weighing on the stock market,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “Until we get news on exactly what this is you will see people jumping to buy safe assets on a quiet afternoon.”
Raw material producers lost 3.8 percent as a group and energy shares slid 3.3 percent to lead declines in all 10 of the main industries in the MSCI World Index. Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. lost 8.3 percent and 6.7 percent to the lowest levels since 2010 and 2008, respectively.
The S&P 500 extended April 12’s 0.3 percent decline and Canada’s S&P/TSX Composite Index sank 2.7 percent to bring its two-day slump to 3.8 percent, its worst slide since October 2011. Commodity and energy producers make up 39 percent of the Canadian benchmark.
The Fed Bank of New York’s general economic index dropped to 3.1 this month from 9.2 in March. Readings exceeding zero signal expansion in New York, northern New Jersey and southern Connecticut. The median projection of 47 economists surveyed by Bloomberg was 7.
Sprint Nextel Corp. jumped 13 percent, the most since October, after Dish Network Corp. made an unsolicited $25.5 billion offer for the third-largest U.S. wireless carrier, topping a Softbank Corp. bid.
The Stoxx Europe 600 Index fell 0.7 percent as a gauge of basic-resources producers slid 4.8 percent to the lowest level since October 2011. Randgold Resources Ltd., a miner of the precious metal in West Africa, and Kazakhmys Plc, Kazakhstan’s biggest copper producer, lost more than 8 percent in London trading.
European Central Bank President Mario Draghi said monetary policy can’t address the root cause of the sovereign debt crisis and it’s up to governments to enact structural reforms.
“Problems in the euro-area economic landscape still loom large” and “the way out is to restore competitiveness,” Draghi said in a speech in Amsterdam today. “Undertaking structural reforms, budget consolidation and restoring bank balance-sheet health is neither the responsibility nor the mandate of monetary policy.”
The MSCI Emerging Markets Index fell for a second day, retreating 1.8 percent to the lowest level since November. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong slid 2 percent, the most in a week. China’s economy grew 7.7 in the first quarter from a year earlier, less than the 8 percent median of 41 estimates in a Bloomberg survey. Industrial production rose 8.9 percent in March, compared with a 10.1 percent forecast.
Russia’s Micex Index sank 1.9 percent and Brazil’s Bovespa retreated 3.2 percent for its biggest drop since May as Vale SA tumbled 5.7 percent to an almost four-year low.
India’s Sensex index gained 0.6 percent after a report showed lower-than-estimated inflation. Venezuela’s dollar bonds fell, sending the yield on notes due in 2027 up 33 basis points to 9.41 percent, as opposition parties challenged the election victory of ex-President Hugo Chavez’s handpicked successor, Nicolas Maduro.
The won strengthened against 15 of its 16 major peers, climbing 0.7 percent versus the dollar, after the U.S. agreed to work with China, Japan and South Korea to lure North Korea back into nuclear talks.
The yen and dollar rose the most against currencies of commodity-exporting nations, with the New Zealand and Australian dollars and South Africa’s rand weakening more than 3 percent versus their Japanese counterpart.
Japan will be reminded of its pledge not to drive down the yen when Group of 20 finance chiefs meet this week in Washington. The U.S. Treasury said it would pressure Japan to avoid “targeting its exchange rate for competitive purposes” in its semi-annual currency report to Congress released in Washington on April 12. Bank of Japan Governor Haruhiko Kuroda, who surprised markets April 4 by doubling monthly bond purchases in an effort to end deflation, said today there are signs Japan’s economy is picking up.