 Europe Stocks Drop as Emerging-Market Losses Spread; Oil Slides
Bloomberg - 8/19/2015 3:18:31 PM
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European stocks fell with U.S. equity-index futures amid concern that the selloff in emerging markets is spreading. Vietnam and Kazakhstan allowed their currencies to weaken, while oil retreated.
The Stoxx Europe 600 Index lost 1 percent by 8:25 a.m. in London, while Standard & Poor’s 500 Index futures slid 0.3 percent. The MSCI Emerging Markets Index fell 0.3 percent. Vietnam devalued the dong by 1 percent, while the Kazakh tenge plunged 4.6 percent to the weak end of its allowed trading range. U.S. crude dropped for the second time in three days. Gold climbed 0.4 percent.
“Investors are getting the ultimate scare with uncertainties over China, weakening currencies, and prospects of a U.S. rate increase,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “Investors are repatriating funds and staying out until the dust settles.”
Riskier assets are coming under pressure as China’s economy slows and the Federal Reserve moves closer to its first rate increase since 2006. Minutes of the Fed’s July meeting are due Wednesday. Bloomberg’s commodity index is at its lowest level since February 2002 amid slowing global demand and rising supplies of crude and basic materials.
Vietnam also widened the currency’s trading band to 3 percent either side of the new fixing. It’s the second time the band has been extended in the immediate wake of China’s devaluation.
Kazakhstan’s tenge fell to 196.97, the most since February 2014. The country’s central bank, which widened the tenge’s trading band in July, could not be immediately reached for comment.
Stoxx 600
All 19 industry groups on the Stoxx 600 retreated, while the emerging-markets stock gauge traded at the lowest level since October 2011. Hong Kong’s Hang Seng China Enterprises Index dropped 1.3 percent toward its lowest close since November.
The Shanghai Composite Index erased a drop of as much as 5.1 percent to close 1.2 percent higher. The gauge earlier broke below its 200-day moving average, a level that has prompted rebounds on two occasions since the start of July.
The Kospi index in Seoul slid 0.9 percent. Amorepacific Corp., a Korean cosmetics company that counts China as its second-biggest market, slipped 4.4 percent. The stock is down 17 percent since China devalued the yuan last week.
Japan’s Topix index slipped 1.4 percent as the yen strengthened 0.1 percent. Traders are betting the yen is about as weak as it’s going to get this year, cutting expectations for price swings by the most among major currencies this year.
The euro strengthened 0.4 percent to $1.1067, snapping a four-day losing streak. Asian and commodity-linked currencies have borne the brunt of declines since the yuan was ratcheted lower. A gauge of 20 emerging-market currencies has extended its longest streak of weekly losses since 2000.
Ringgit Slips
Malaysia’s ringgit fell 0.3 percent to 4.1020, near levels last seen in 1998. The country is paying the price for weak foreign currency holdings and messy politics as the cost to protect its debt soars to near a four-year high. UBS Group AG predicts even more pain ahead.
Oil resumed its decline, sliding 0.8 percent to $42.26 in New York, as OPEC nations signal they will continue pumping crude amid a global glut. Brent weakened 0.5 percent to $48.57.
Iraq, the second-biggest member of the Organization of Petroleum Exporting Countries, said a production boost was important to meet the needs of its growing population, while Angola will export the most crude in four years during October, according to a preliminary loading program obtained by Bloomberg.
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