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Global stocks fall, yen jumps as commodity prices slide for second day

Pedestrians are reflected on an electronic stock at a securities firm in Tuesday, March 15, 2016.

Global stocks dropped as the biggest two-day slide in commodity prices in a month awakened memories of the financial market turmoil that marked the start of this year. The Australian and Canadian dollars fell and the yen jumped probably the most per week.

Benchmark share gauges in Europe and Asia retreated using their highest closes since January, while U.S. stock index futures declined with Fed policy makers set to start a two-day meeting. The yen strengthened against all 31 major peers as the Bank of Japan refrained from adding to record monetary stimulus in a review on Tuesday. The currencies of raw- material exporting nations slid. West Texas Intermediate oil going to its first back-to-back decline in a month after Russia signaled Iran won’t join major producers in freezing output to handle a worldwide glut.

While world equities have staged a comeback since reaching a 2 1/2-year low in mid-February, to date there aren’t many signs that monetary easing in China, Europe and Japan is pulling the worldwide economy out of a slump. The BOJ’s decision to keep policy was forecast by most economists and also the authority said it’s ready to ease further as needed to revive inflation expectations. The ecu Central Bank announced an growth of stimulus a week ago, while the Fed will conclude an evaluation on Wednesday and the Bank of England each day later.

“Don’t forget that the concerns we had at the beginning of the year are still virtually there,” said Kully Samra, who manages U.K. clients for Charles Schwab Corp. working in london. “It’s about just how much central banks can reassure investors. Language has become a policy tool in itself. How a Fed communicates with the market is likely to be very important.”

Investors will be seeking guidance in the Fed around the trajectory of U.S. interest rates as expectations build for policy makers to increase December’s increase in borrowing costs. Fed funds futures show the prospect of a rise this season is now about 78 percent, having risen from as little as 11 percent in February as U.S. economic data improved and equities rebounded.

The MSCI All Country World Index fell 0.5 percent at 10:18 a.m. London time, halting a two-day gain. The Bloomberg Commodity Index declined 1.1 per cent, after sliding 0.7 per cent on Monday, and also the yen strengthened 0.7 perc ent to 113.04 per dollar.

Stocks

The Stoxx Europe 600 Index dropped 0.9 per cent with commodity producers posting the largest drop from the index’s 19 industry groups.

Antofagasta Plc led miners lower, sliding more than 10 % after abandoning its dividend and saying annual profit slumped 99 percent. Among energy-related companies, Tullow Oil Plc and Seadrill Ltd. lost a lot more than 6 percent.

Standard & Poor’s 500 Index futures declined 0.5 per cent, after U.S. equities closed little changed on Monday. Investors will look to data releases on retail sales and manufacturing activity within the state of New York for warning signs of the health of the world’s biggest economy and the trajectory of interest rates.

Deutsche Bank AG strategists including Sebastian Raedler have recommended investors stay cautious on equities because the Fed statement Wednesday can lead to a sharp re-pricing of tightening expectations.

The MSCI Asia-Pacific gauge fell 0.9 percent, led by declines in raw-materials producers. Benchmarks declined across the majority of the region with Japan’s Topix index losing 0.6 percent and Australia’s S&P/ASX 200 Index sliding 1.4 per cent. The Shanghai Composite Index added 0.2 percent.

Currencies

The yen appreciated 0.8 percent to 125.37 per euro following the BOJ maintained a negative policy rate and kept asset- purchase plans unchanged. While only five of 40 economists surveyed expect further easing at Tuesday’s BOJ meeting, 88 percent forecast more stimulus after July.

“The BOJ conceded that inflation expectations have weakened, pointing to a high near-term chance of more policy easing,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “The yen will test 110 per dollar prior to the center of the year,” he explained, a level last observed in October 2014.

The currencies of South Africa, Australia and Canada all lost a minimum of 0.6 percent amid widespread declines within the prices of commodities.

The British pound fell 1 per cent against the dollar, the most in more then three weeks, before Chancellor of the Exchequer George Osborne’s annual budget on Wednesday and also the Bank of England’s policy review on Thursday. Economists in a monthly Bloomberg survey put the probability of a decrease in the Bank of England’s benchmark rate this season at 23 percent.

Commodities

WTI crude sank 2.7 percent to US$36.17 a barrel, after tumbling 3.4 per cent on Monday. Iran has “reasonable arguments” because of not joining an alliance to cap production now, Russian Energy Minister Alexander Novak said after meeting with his Iranian counterpart. U.S. stockpiles probably expanded a week ago, keeping supplies at the most since 1930, analysts predicted ahead of data due on Wednesday.

Copper for delivery in three months declined 1 % around the London Metal Exchange after stockpiles in China spurred concern about the effectiveness of demand within the world’s biggest user. Inventories monitored by the Shanghai Futures Exchange have hit a record high.

Gold for immediate delivery fell 0.2 per cent to $1,233 an ounce, after sliding a lot more than 1 % on each of the latter trading days. Investors were net-sellers of gold in exchange- traded funds for just the eighth time this season on Monday.

Bonds

U.S. Treasuries due inside a decade rose, pushing their yield three basis points lower to at least one.93 percent. Pacific Investment Management Co. predicts the speed will climb as high as 2.5 percent this season as inflation accelerates and also the Fed raises rates of interest.

Euro-area government bonds declined, led by Portuguese and Spanish securities. Portugal’s 10-year yield climbed six basis suggests 2.99 %, while Spain’s gained three basis suggests 1.50 percent.

The price of insuring corporate debt against default rose for any second day. The Markit iTraxx Europe Index of credit- default swaps on investment-grade companies climbed two basis points to 74 basis points. An index of swaps on junk-rated companies rose five basis points to 320 basis points. Both gauges are still close to the lowest this year.

The new-issue market extended a busy start to a few days. Companies looking to sell debt included steelmaker ThyssenKrupp AG, Australian shopping-mall operator Scentre Group, and Relx Group, which publishes the Lancet, Flight International and Farmers Weekly, according to separate people acquainted with the offers, who asked not to be identified simply because they aren’t authorized to speak publicly.

Emerging Markets

The MSCI Emerging Markets Index retreated the very first time in four days, sliding from this year’s high as all ten industry groups declined. Shares in Nigeria and Qatar dropped a minimum of 1 percent.

A gauge of 20 developing-nation currencies slid for a second day. The Russian ruble lead losses with a 1.1 % drop in comparison to the dollar, as falling crude prices overshadowed optimism that relations with Europe and the U.S. will improve after President Vladimir Putin ordered some forces to withdraw from Syria.

Bloomberg News

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