Oil Bear Market Drops Stocks; China in MSCI Index: Markets Wrap

  • Crude falls below $43 a barrel on supply glut concerns
  • China A shares to enter emerging market index starting in May

Bank, Tech Ratio Has Climbed From 5-Year Low

U.S. stocks fell the most in a month, retreating from all-time highs as crude oil slid into a bear market on concern the global supply glut will persist. China’s yuan got a small bump after MSCI Inc. added the nation’s domestic stocks to its emerging-markets index.

The S&P 500 Index lost 0.7 percent for its biggest decline since May 17 as energy producers and companies whose profits are most linked to economic growth, including makers of non-essential consumer goods and industrial producers, led declines. The dollar rose as Fed officials continued to reiterate a moderately hawkish stance on monetary policy. Treasuries rose.

The MSCI decision will add 222 China A-share stocks starting in May 2018. The index provider delayed its decision on the status of Argentina’s stocks and will consult on the possible inclusion of Saudi Arabia in the index. China’s $6.8 trillion onshore market is the world’s second largest and accounts for 9 percent of global stock value, but had been rejected for index inclusion three times by MSCI over issues including capital controls and long trading halts. Hong Kong shares retreated ahead of the decision.

Stocks in the U.S. faltered as the weakness in crude and other commodities dents arguments from American central bankers that weak inflation rates will be transitory, even as the economy shows few signs of distress and haven assets have not been in demand. The Fed raised rates last week. Stocks had barreled to fresh highs after a series of geopolitical concerns seems to have faded, though formal negotiations over Britain’s exit from the European Union began somewhat contentiously.

Read more: Torturous Road to Brexit Seen by Most in Barclays Investor Poll

Here are some of the key upcoming events:

  • Still to come on the Fed speaker list: Eric Rosengren, Robert Kaplan, Jerome Powell, James Bullard and Loretta Mester.

Read our Markets Live blog here.

Here are the main moves in markets:

Stocks

  • The S&P 500 fell 0.7 percent to 2,437.08 at 4 p.m. in New York. Energy stocks and consumer discretionary producers slumped 1.3 percent to lead the gauge lower. Industrial and phone stocks fell 1.1 percent.
  • The Dow Jones Industrial Average dropped 0.3 percent after it ended Monday at a record, while the Nasdaq Composite Index declined 0.8 percent.
  • The Stoxx Europe 600 erased a gain to end 0.7 percent lower. The U.K.’s FTSE 100 Index declined 0.7 percent.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.3 percent after advancing 0.4 percent on Monday. The measure touched the lowest level since October last week.
  • The British pound fell 0.8 percent to $1.2631 for a second day of losses as Bank of England Governor Mark Carney said he is still worried about the impact of Brexit on the economy.
  • The euro was down 0.2 percent to $1.1126.
  • The yen gained 0.1 percent to 111.445 per dollar. The currency retreated 0.6 percent on Monday.

Bonds

  • The yield on 10-year Treasuries fell three basis points to 2.16 percent, after rising four basis points Monday. The yield curve flattened amid demand for longer-dated maturities.
  • Benchmark yields in the U.K. fell four basis points.

Commodities

  • West Texas oil fell more than 20 percent from its highest close this year. It was down more than 2 percent Tuesday to settle at $43.23 a barrel, the lowest since August.
  • Gold futures slipped 0.2 percent to $1,244 an ounce, after closing Monday at the lowest in more than a month.
  • Copper posted its biggest loss in six weeks as the dollar strengthened.
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