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Hong Kong - European stocks fell with US equity-index futures after a drop in Chinese industrial profits dragged down emerging markets and weighed on commodities prices.
Energy companies led declines in the Stoxx Europe 600 Index as crude slid from a three-week high, while Russia’s ruble and Canada’s dollar led losses in currencies of oil-producing nations.
That followed the Shanghai Composite Index’s worst day in a month as fresh signs of slowing growth in China added to concern looming changes to the country’s listing regime and the expiration of a share-sale ban will hurt demand for its stocks. European government bonds rose and US natural gas prices advanced.
“Oil and gas companies are under pressure because of the Chinese statistic over the weekend that showed industrial companies’ profit is declining, plus the price of oil is dropping,” said John Plassard, a senior equity-sales trader at Mirabaud Securities LLP in Geneva.
While a rally in oil prices last week helped relieve some of the pressure on energy producers, West Texas Intermediate crude is still down about 30% this year and slumping earnings in the sector have helped drag global equity indices lower and roiled markets for non-investment grade debt. Rising supply is also threatening to keep down prices in 2016.
Iran’s priority is to boost crude shipments to pre-sanction levels, state-backed IRNA reported, citing Oil Minister Bijan Namdar Zanganeh.
The Stoxx 600 fell 0.4% at 15:21 and Standard & Poor’s 500 Index futures dropped a similar amount. WTI was 2.7% lower at $37.08 a barrel, after jumping 9.7% last week. The ruble fell to its weakest level in 2015 and China’s yuan closed at a four-year low.
Stocks
A gauge of oil and gas producers in Europe sank 1.3% as all but one industry group declined.
The volume of shares changing hands on the Stoxx 600 was almost 70% below the 30-day average. The index is heading for its worst December since 2002 after an addition in European Central Bank stimulus fell short of investor expectations and energy and commodity producers deepened their losses.
While the S&P 500 Index posted its biggest weekly jump in more than a month last week, stocks are barely up this year, and a case could be made that it was the worst for US asset- allocating bulls in almost 80 years, according to data compiled by Bianco Research LLC and Bloomberg. The S&P 500 has gained 2.2% with dividends, cash is up less, and 30-year Treasuries and commodities dropped.
China
The Shanghai Composite Index retreated 2.6%, the biggest one-day drop since November 27, and Hong Kong’s Hang Seng Index slipped 1%, while the gauge of Chinese companies listed in the city retreated 1.7%. The China Enterprises Index is down more than 18% this year, the worst- performing major Asian gauge of 2015.
Investors are fretting that the end of a six-month ban on sales by shareholders with stakes of 5% or more in Chinese companies will unleash another wave of selling just as reforms to the initial public offering system see a raft of new listings dilute demand for existing equities.
Compounding those concerns, the head of the nation’s third- largest mobile carrier was swept up in anti-graft crackdown. China Telecom Corp., the nation’s third-largest wireless carrier, dropped 1.3% in Hong Kong. China’s Central Commission for Discipline Inspection said in a statement on Sunday that Chang Xiaobing, who headed China Unicom (Hong Kong) for more than a decade before becoming chairman and chief executive officer of China Telecom in September, is being probed for severe disciplinary violations.
The yuan’s spot rate in Shanghai closed down 0.18% at 6.4880 a dollar, the lowest level since May 2011, according to China Foreign Exchange Trade System prices.
Commodities
Brent crude fell 2.3% to $37.02 a barrel. Iran plans to add 500 000 barrels a day of exports one week after sanctions are lifted, said Rokneddin Javadi, deputy oil minister and head of National Iranian Oil, according to Shana news agency.
US natural gas futures advanced 4.1%, heading for a third straight increase. The contract has gained more than 10% in three days amid forecasts for an end to unseasonably warm conditions that had curbed demand for heating fuel.
Gold for immediate delivery declined 0.5%. Copper slumped 1.8% in New York after the industrial profits report for China highlighted concern that demand for the metal may weaken in the world’s largest user. The London Metal Exchange was closed for a UK public holiday.
Currencies
The Bloomberg Dollar Spot Index was little changed after weakening for five straight days through Thursday. The euro was little changed at $1.0967 and the yen was at 120.43 per dollar.
Commodity-producers’ currencies weakened as oil resumed its decline. The Canadian dollar retreated 0.4 percent.
The ruble sank 1.7% and touched its lowest level in more than a year.
Emerging markets
An index of 20 emerging-market currencies dropped 0.2% after rising 0.6% last week in the biggest gain since November. The gauge has lost 14% in 2015 as all but one of the 24 developing-nation exchange rates tracked by Bloomberg weakened, led by the Argentine peso, Brazilian real, Colombian peso and South Africa’s rand.
The MSCI Emerging Markets Index fell on Monday after rising almost 4% in the past two weeks. Equities in Russia and South Africa fell at least 0.4%. Stocks in Dubai declined 1.3%.
Bonds
Eurozone government bonds advanced as falling commodity prices weighed on the outlook for consumer-price growth, boosting demand for fixed-income assets.
Benchmark German 10-year bund yields fell two basis points, or 0.02 percentage point, from the December 23 close to 0.61%. Similar-maturity Italian bond yields slipped two basis points to 1.64%.
Treasury 10-year note yields were little changed at 2.24%.
The US is selling $26bn of two-year notes on Monday, with a further $64bn of sales due in the next two days.
