Signs of distress in financial markets are gathering force as concern over the state of the global economy deepens.
European stocks are down for a sixth day and the cost of protecting European banks’ and insurers’ senior debt is on its worst run since March 2013. In addition, yields on bonds for Europe’s most-indebted countries are rising, while the rate on Germany’s 10-year bunds are at the lowest since April. Oil is lower for a third day and nickel is trading at its weakest level since 2003 as supply exceeds slowing demand. Futures point to declines in U.S. shares amid a retreat in emerging markets.
“Investors can’t make up their minds about the global economy, but the risk of recession and deflation is rising,” said Francois Savary, the chief investment officer of Prime Partners SA, a Geneva-based investment manager. “It’s not enough that valuations have receded quite significantly and earnings haven’t been too bad — sentiment is very low and there isn’t much visibility right now. That’s frightening.”
U.S. stock index futures were lower on Monday, with the Dow Jones industrial average slipping nearly 200 points, as concern about everything from China to oil and interest rates led strategists to lower their year-end projections for the benchmark gauge. Oil failed to hold gains after Saudi Arabia held talks Sunday with Venezuela, which is trying to drum up support for a coordinated oil-output cut to buttress prices. Most Asian markets were closed for the lunar New Year holidays.
The Stoxx Europe 600 Index slid 2.4 per cent at 6:56 a.m. in New York, trading at 14 times estimated earnings, down from 17 times in April. The gauge has lost 13 per cent this year. All 19 industry groups declined with media and technology companies leading losses. Greece’s ASE Index sank 5.9 per cent, heading for the lowest close since 1990.
Imagination Technologies Group Plc slumped 4.7 per cent after forecasting a “material reduction” in sales and profitability for the full year. The company also said its chief executive officer has stepped down.
Randgold Resources Ltd. rose 2.6 per cent after saying it more than doubled its spare cash last year, allowing the metals producer to increase its dividend by 10 per cent. Casino Guichard-Perrachon SA advanced 2.1 per cent as it agreed to sell its stake in a Thai supermarket chain for 3.1 billion euros (US$3.5 billion).
Standard & Poor’s 500 Index contracts expiring in March reversed earlier gains, falling 1.4 per cent. The index on Friday capped its second-biggest weekly drop this year with its worst performance on the day of a U.S. jobs report since June 2012.
The MSCI Emerging Markets Index fell 0.6 per cent, extending last week’s decline. Benchmarks gauges in Russia, India and Poland slid at least 1.3 per cent while Gulf shares advanced.
Markets closed today include those in China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Brazil and Argentina.
China reported Sunday its foreign-exchange reserves shrank US$99.5 billion in January to US$3.23 trillion, the smallest level since 2012.
The Markit iTraxx Europe Senior Financial Index of credit- default swaps rose 11 basis points to 132 basis points. An index of swaps tied to junk-rated companies increased for a sixth day, the longest run since October 2014. A gauge of investment-grade swaps rose four basis points to 113 basis points. All three indexes are at the highest since 2013.
Germany’s government bonds advanced, pushing the two-year yield to the lowest on record, as investors sought the safest fixed-income assets.
Portugal led a drop in the bonds of Europe’s higher debt and deficit nations, pushing the yield spread with German bunds above 300 basis points for the first time since 2014.
Germany’s two-year note yield touched minus 0.506 per cent, the lowest since Bloomberg began compiling the data in 1990. Portugal’s 10-year bond yield rose as much as 14 basis points to 3.27 per cent, the highest since June. The rate on similar- maturity Spanish notes climbed six basis points to 1.70 per cent, while those on Greek bonds jumped 41 basis points to 9.97 per cent.
Oil fell even after Saudi Arabia and Venezuela met to discuss cooperating to stabilize the market. While Saudi Oil Minister Ali al-Naimi said he held “successful” talks with his Venezuelan counterpart Eulogio del Pino on ways of cooperating to stabilize the market, he didn’t specify any steps producers could take to shore up prices.
West Texas Intermediate crude dropped to US$29.89 a barrel and Brent slid 1.8 per cent to US$33.44.
“The Saudis are the main obstacle to a cut,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “They are buying time while we wait for the solid proof that U.S. production is slowing.”
Nickel fell to the lowest level in almost 13 years on concern that global production cuts are insufficient to counter faltering demand in China, the world’s biggest consumer. The metal used in stainless steel dropped 0.9 per cent to US$8,090 a metric ton on the London Metal Exchange. Copper slipped 0.8 per cent and zinc gained 0.8 per cent.
Gold was little changed at US$1,174.40 an ounce, near the highest level since October. The metal surged Friday after the U.S. jobless rate slid to a 2008 low and hourly earnings rose more than estimated, bolstering the case for the Federal Reserve to tighten monetary policy.
The yen gained against all but two of its 16 major counterparts, advancing 0.1 per cent to 116.71 per dollar.
The euro slid 0.3 per cent to US$1.1118, after rising 3 per cent last week. The pound dropped 0.7 per cent to US$1.4408. The Bloomberg Dollar Spot Index rose for a second day, advancing 0.2 per cent.
Turkey’s lira and Mexico’s peso led emerging-market currencies lower, falling at least 0.6 per cent against the dollar. Hungary forint slipped 0.3 per cent versus the euro. A gauge of 20 exchange rates declined for a second day, slipping 0.2 per cent.