- WTI lower after Iran repeats goal of boosting crude exports
- Emerging markets retreat after China industrial profits drop
A difficult year for markets started off its final week of trading with stocks declining, crude sliding from a three-week high and a drop in Chinese industrial profits dragging down emerging markets.
Energy and raw material producers led the Standard & Poor’s 500 Index lower, though the loss narrowed during the afternoon. That’s after the benchmark U.S. equity gauge rose last week by the most in a month. The Stoxx Europe 600 Index retreated, while Russia’s ruble led declines in currencies of oil-producing nations. The Shanghai Composite Index posted its worst day in a month as fresh signs of slowing growth in China added to concern looming changes to the country’s listing regime and the expiration of a share-sale ban will hurt demand for its stocks.
“We had such a big run over just a couple of days in the stock market and crude oil, so the market was due for a pullback,” said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. “China being down doesn’t help either. It’s a quiet and thin week.”
While a rally in oil prices last week helped relieve some of the pressure on energy producers, West Texas Intermediate crude is still down about 30 percent this year and slumping earnings in the sector have helped drag global equity indexes lower and roiled markets for non-investment grade debt. Rising supply is also threatening to keep down prices in 2016. Iran’s priority is to boost crude shipments to pre-sanction levels, state-backed IRNA reported, citing Oil Minister Bijan Namdar Zanganeh.
Raw materials are headed for their biggest plunge in seven years, with the Bloomberg Commodity Index down 25 percent. Other asset classes didn’t fare much better in 2015. The MSCI All-Country World Index, which tracks developed and emerging equity markets, has slumped 3.9 percent, while global bonds have lost 2.4 percent, according to a Bank of America Merrill Lynch index. A measure tracking world currencies fell 2.3 percent.
The S&P 500 dropped 0.2 percent at 4 p.m. New York time, after earlier falling as much as 0.8 percent. Volume on U.S. exchanges was about 31 percent lower than the three-month average. Markets reopened after the Christmas holiday, with this week also shortened by the New Year’s Day holiday on Friday.
The Stoxx 600 sank 0.5 percent as all but one industry group declined. The index is heading for its worst December since 2002 after an addition in European Central Bank stimulus fell short of investor expectations and energy and commodity producers deepened their losses.
The Shanghai Composite Index retreated 2.6 percent, the biggest one-day drop since Nov. 27. Investors are fretting that the end of a six-month ban on sales by shareholders with stakes of 5 percent or more in Chinese companies will unleash another wave of selling just as reforms to the initial public offering system see a raft of new listings dilute demand for existing equities.
The yuan’s spot rate in Shanghai closed down 0.18 percent at 6.4880 a dollar, the lowest level since May 2011, according to China Foreign Exchange Trade System prices.
WTI was 3.7 percent lower at $36.69 a barrel, after jumping 9.7 percent last week. Iran plans to add 500,000 barrels a day of exports one week after sanctions are lifted, said Rokneddin Javadi, head of National Iranian Oil Co., according to Shana news agency.
U.S. natural gas futures advanced 10 percent, rising for a third straight increase. The contract has gained more than 19 percent in three days amid forecasts for an end to unseasonably warm conditions that had curbed demand for heating fuel.
Gold for immediate delivery declined 0.7 percent. Copper slumped 1.9 percent in New York after the industrial profits report for China highlighted concern that demand for the metal may weaken in the world’s largest user. The London Metal Exchange was closed for a U.K. public holiday.
The Bloomberg Dollar Spot Index was little changed after weakening for five straight days through Thursday. The euro rose against nine out of 10 Group-of-10 counterparts.
Commodity-producers’ currencies weakened as oil resumed its decline. The ruble sank 2.1 percent to its weakest level this year, while the Chilean peso and Canadian dollar also declined.
An index of 20 emerging-market currencies dropped 0.1 percent after rising 0.6 percent last week in the biggest gain since November. The gauge has lost 14 percent in 2015 as all but one of the 24 developing-nation exchange rates tracked by Bloomberg weakened, led by the Argentine peso, Brazilian real, Colombian peso and South Africa’s rand.
The MSCI Emerging Markets Index fell on Monday. Equities in Russia and South Africa fell at least 0.2 percent. Stocks in Dubai declined 1.3 percent.
Treasury two-year notes dropped, pushing yields to the highest since April 2010, as the U.S. sold $26 billion of the securities amid expectations that the Federal Reserve will lift interest rates as many as four times next year.
Treasury 10-year note yields fell one basis point to 2.23 percent.
German 10-year bund yields dropped seven basis points to 0.56 percent. Similar-maturity Italian bond yields slipped five basis points to 1.61 percent.