U.S. Stocks Slip as China Stimulus Boosts Commodities; Yen Jumps

Making the Most of an Extended Slow-Growth Cycle
  • S&P 500 loses monthly gain even as oil tops $33 a barrel
  • China cuts reserve-requirement ratio for local banks

U.S. stocks failed to hold onto a monthly gain after two weeks of advances, with the Standard & Poor’s 500 Index turning negative in afternoon trading. Fresh stimulus from China bolstered commodities and emerging-market assets, while the yen strengthened.

The S&P 500’s advance faltered amid trading volumes 15 percent below the 30-day average, as a rout in Endo International Plc dragged health-care shares lower, while oil and gas producers sank even as crude futures rallied. The U.S. equity benchmark fell for a third straight month in February. Brazil’s Ibovespa jumped 2.9 percent as China cutting reserve-requirement ratios for banks burnished optimism over the Asian economy’s prospects, boosting copper to oil. The yen capped its biggest monthly gain since 2008.

February has been a mixed month for financial markets, with global stocks posting their longest run of monthly losses since 2011 despite rallying more than 5 percent since Feb. 11. Mounting signs that American consumers can still power the world’s largest economy and hints from central banks in Asia and Europe that more stimulus is at the ready have underpinned the revival. China said Monday it would reduce the amount of cash lenders must lock away in a move to cushion a slowdown there, while weak euro-zone inflation fueled calls for stimulus. Crude’s rebound from a 12-year low has also sparked optimism.

“Following a pretty good week, investors might be taking a little pause, perhaps taking some profits,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. “Typically, the market goes in lockstep with oil, which is up today, but that connection has broken down.”

Stocks

The S&P 500 fell 0.8 percent as of 4 p.m. in New York, bringing its decline in February to 0.4 percent. The benchmark fell below its average price over the past 50 days after closing above it last week for the first time in 2016. Trading in the U.S. was subdued on the final day of the month, with investors remaining on the sidelines following the slowest week of trading so far this year.

The Stoxx Europe 600 Index jumped 0.7 percent Monday as a late-trading rally pushed European equities up for a third day -- the first time it happened this year. Commodity producers surged after China stepped up support for its slowing economy. The benchmark index cut its monthly loss to 2.6 percent.

Financial companies led the MSCI All-Country World Index down 0.9 percent this month, further its worst start to a year since 2009.

The MSCI Asia Pacific Index lost 0.4 percent Monday as stock indexes from Japan to Hong Kong slipped more than 1 percent.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, slipped 0.1 percent Monday to leave it down 1.8 percent in the month. The index climbed 1.6 percent in January and 9 percent last year.

The yen strengthened for the first time in four days, gaining against all of its 16 major peers except for the South African rand. Japan’s currency has risen 7.4 percent in February, more than double the gain of any other major currency.

Eurogroup chief Jeroen Dijsselbloem said Shanghai on Saturday that “there was some concern that we would get into a situation of competitive devaluations” with regards to Japan at the Group of 20 meeting. Japanese Prime Minister Shinzo Abe told parliament Monday that he is not trying to influence foreign-exchange rates.

China’s yuan declined 0.2 percent in Shanghai, retreating for a seventh day as the central bank weakened the currency’s reference rate and stepped up efforts to cushion the economic slowdown with the cut in banks’ reserve ratios.

Commodities

Oil settled at its highest level in seven weeks, with West Texas Intermediate crude up 3 percent to $33.75 a barrel. Brent crude added 2.5 percent to $35.97.

Record-high stockpiles of U.S. natural gas for the time of year sent gas futures down 4.8 percent to $1.71 per million British thermal units, extending a fourth weekly decline as a mild winter limited the drawdown.

Gold posted its biggest monthly advance in four years as the uncertain global outlook spurred demand for haven assets. Bullion for immediate delivery added 1.1 percent to $1,234.40 an ounce. It’s up 11 percent in February, the most since January 2012.

Bonds

Yields on 10-year Treasury notes fell three basis points, or 0.03 percentage point, to 1.74 percent. Rates have dropped 18 basis points in February after starting the year at 2.27 percent.

Yields on German nine-year bonds dropped below zero for the first time since April. The nation’s 10-year yield also slipped to a 10-month low, as bonds drew support from the lower-than-estimated euro-area inflation readout.

Emerging Markets

Emerging-market currencies erased a monthly loss, with the the lira strengthening after Turkey retained its investment-grade status. The rupee advanced on optimism India will stick to fiscal targets, while stocks headed for the smallest monthly drop since their October rally.

The MSCI Emerging Markets Index was little changed Monday, leaving its February decline intact at 0.3 percent, a fourth straight monthly drop. The Shanghai Composite Index dropped 2.9 percent, erasing this month’s gain. The measure has declined 24 percent this year, the worst performer among 93 global equity indexes, on concern capital outflows will accelerate as the economic slowdown deepens.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE