By Nick Gentle and Emma O’Brien
Asian stocks headed for the longest losing streak in 12 years, led by Chinese shares, and government bonds climbed before the Federal Reserve reviews interest rates. Metals rebounded and the ruble fell to a new low.
The MSCI Asia Pacific Index (MXAP) fell 0.5 percent by 7:42 a.m. in London, falling a ninth day as Chinese stocks in Hong Kong head for their worst five-day slump since last year’s credit crunch. Equity-index futures in Europe and the U.S. were little changed. Yields on 10-year notes from Australia to Germany fell as Treasuries climbed a second day. Gold rose with nickel. The ruble fell 1 percent. China’s yuan fell as much as 0.25 percent after foreign investment plunged to a four-year low.
Fed officials meet to review policy from today, with an unexpected decline in American factory output tempering speculation that the timeline for interest-rate increases could be brought forward. Non-financial inbound investment in China in August fell 14 percent from a year earlier to $7.2 billion, the Ministry of Commerce said today. Morning trading in Hong Kong was canceled because of a typhoon, while Australia’s central bank said it will monitor risks from rising property prices as policy makers reiterated a period of stability in record-low interest rates.
“The big issue is whether the Fed will change its forward guidance to indicate they are getting closer to the decision on putting interest rates up,” Stephen Halmarick, head of investment markets research at Colonial First State Global Asset Management, which oversees about A$170 billion ($154 billion), said by phone from Sydney. “The transition period as the Fed tightens will be difficult for markets in the Asian region. We are in for a few months of increased volatility.”
All 10 industry groups on the Asia-Pacific equity gauge retreated as the measure heads for its longest run of daily declines since June 2002. About five stocks dropped for every three that advanced.
Hong Kong’s Hang Seng Index lost 0.6 percent. The Hang Seng China Enterprises Index dropped 0.8 percent, taking its five-day slide to 5.8 percent, the biggest such drop since it lost 8.9 percent in the period to June 23 last year. The Shanghai Composite Index slumped 1.3 percent, the most in a month.
The Bloomberg Dollar Spot Index erased early losses to climb 0.1 percent. The measure touched a 14-month high yesterday. The U.S. currency is up at least 0.5 percent against all 16 of its major peers this month, with the currencies of commodity exporters Brazil, Australia and Norway leading declines.
The U.S. central bank has been saying since March that interest rates would stay low for a “considerable time” after it completes the asset purchases known as quantitative easing. Speculation the Fed may bring forward rate increases has boosted the allure of the dollar this month and depressed Treasuries.
The yield on 10-year Treasury notes jumped 25 basis points, or 0.25 percentage point, this month through yesterday, heading for the biggest advance this year, as the Fed winds down asset purchases.
The rate on 10-year notes was 2.57 percent today. Yields on the notes dropped two basis points yesterday, falling for the first time in eight days to snap the bonds’ longest losing streak since June last year. Australian bonds due in a decade paid 3.61 percent, down two basis points from yesterday. French and German notes due in a decade also rose.
The yuan fell 0.15 percent to 6.1510 per dollar, after retreating 0.2 percent in the last two trading days, China Foreign Exchange Trade System prices show. The onshore rate was weaker than the central bank’s fixing for the first time since Aug. 13. The People’s Bank of China cut its reference rate 0.02 percent to 6.1462.
Foreign direct investment into China, a gauge of external confidence, slumped to a four-year low amid antitrust probes into multinational companies that have spurred a letter of complaint from the U.S. August’s drop followed a 17 percent plunge in July and was the first back-to-back decline of more than 10 percent since 2009, based on previously reported data compiled by Bloomberg.
Russia’s ruble slid to as low as 38.820 per dollar, the weakest ever, according to Bloomberg data. The currency slumped 1 percent to 50.15 per euro, the weakest since March. Moscow’s Micex Index was little changed.
Damage from the conflict in Ukraine, including the effect of sanctions, is greater than the harm that would be caused to Russia from Ukraine’s association agreement with the European Union, former Russian Finance Minister Alexei Kudrin said at an American Chamber of Commerce conference in Moscow.
U.S. factory production fell 0.1 percent in August from July, when it grew 0.4 percent, data yesterday showed. Economists surveyed by Bloomberg predicted an increase of 0.3 percent.
The Nasdaq 100 dropped 1 percent to a one-month low, while the Russell 2000 tumbled 1.2 percent, the most since July 31, bringing its retreat in 2014 to 1.5 percent. The Standard & Poor’s 500 Index ended the U.S. day down 0.1 percent, with technology shares leading declines with a 0.6 percent drop. The Dow Jones Industrial Average added 0.3 percent as energy shares rebounded.
Selling in the U.S. was heaviest in stocks with the highest valuations. Facebook Inc. (FB) plunged 3.7 percent for the heftiest loss in the S&P 500. TripAdvisor Inc., Micron Technology Inc. and Netflix Inc. dropped at least 3.9 percent. Tesla Motors Inc. (TSLA) sank 9.1 percent for its worst day since May.
The yen weakened 0.1 percent to 107.28 a dollar.
The Organization for Economic Cooperation and Development trimmed its growth forecasts for the biggest developed economies yesterday, in the face of increasing geopolitical risks and subdued European inflation. Euro-area gross domestic product is now expected to expand 0.8 percent this year, down from 1.2 percent forecast in May, while the U.S. will expand 2.1 percent instead of 2.6 percent, the Paris-based OECD said in a report.
West Texas Intermediate crude oil fell 0.3 percent to $92.68 a barrel, after ending last session up 0.7 percent. Data from the U.S. Energy Information Administration due tomorrow will probably show crude stockpiles shrank by 1.5 million barrels last week to 357.1 million, according to analysts surveyed by Bloomberg. Brent crude was little changed at $97.88 a barrel.
Nickel for three-month delivery on the London Metal Exchange halted a five-day slide in early trading, rising 0.8 percent to $18,199 a metric ton. Zinc added 0.4 percent to $2,258.25 a ton, while aluminum gained 0.6 percent to $2,002.25.
Gold rebounded 0.2 percent to $1,235.98 an ounce and palladium rose 0.6 percent to $839.80.
Wheat futures in Chicago climbed 0.5 percent to $5.03 a bushel, snapping six days of losses. Australia, the world’s fifth-largest exporter, will ship 18.1 million metric tons of wheat in the 12 months started July 1, down from 18.7 million tons predicted in June, according to the government forecaster.