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Commodities sell-off takes toll on stock markets – Financial Times

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Wednesday 08.45 GMT

What you need to know

  • Trend for weaker Chinese data hits commodities markets
  • Decline of over 1% for Brent crude hurts energy stocks
  • Miners hit by weaker metals prices
  • European equities indices join sell-off after New York slips and Asia falls
  • Dollar continues to drift lower without signs of progress on US tax reform

Leading quote

“Without demand growth, we see limited upside for oil and recently took a neutral stance on the commodity, but think equities can outperform,” says Pierre Bose, investment strategist at Credit Suisse.

“Above-consensus prints on US inflation and retail sales [due later in the session] could push Treasury yields higher if they suggest more action by the Federal Reserve.”

Hot topic

Concern about slowing growth in China and an outlook for rising oil supply is hitting commodities and prices and energy stocks around the world, drawing equities indices further away from their recent highs.

Brent crude, the international oil marker, is down 1.2 per cent at $61.48, while West Texas Intermediate is down 1.1 per cent at $55.10. The Euro Stoxx oil and gas index is down 1.1 per cent in early trade, with the wider Euro Stoxx 600 down 0.3 per cent overall.

The declines come after the International Energy Agency predicted strong growth for US shale oil production. The selling takes Brent down from its recent intraday high of $64.65, which came as investors tracked a political crackdown in Saudi Arabia.

Meanwhile, Chinese futures contracts for iron ore fell by almost 5 per cent, knocking shares in metals producers. The pressure on metals prices tracks official figures for growth in fixed-asset investment, retail growth and industrial production in China, which all came in below expectations this week.

The Euro Stoxx mining index is down 1.7 per cent and the five biggest fallers on London’s resource-heavy FTSE 100 come from the mining sector, with shares in Rio Tinto leading the selling, down 1.9 per cent.

Overall, the main London index is down 0.4 per cent, with its oil majors also hit. BP is down 0.8 per cent and Royal Dutch Shell is 0.9 per cent weaker.

Sydney’s ASX 300 Metals and Mining index is down 2 per cent, with Fortescue Metals Group dropping 3.1 per cent.

Shares in state-owned Chinese oil group PetroChina fell 2.1 per cent and China Petroleum also lost 2.1 per cent. France’s Total is 0.7 per cent weaker and Italy’s ENI is down 0.9 per cent.

Equities

The Xetra Dax 30 in Frankfurt is down 0.5 per cent, with the CAC 40 in Paris 0.1 per cent weaker. It follows a weak lead-in from Wall Street, where the S&P 500 index fell 0.2 per cent, and wider selling in Asia.

Tokyo equities fell by as much as 2.2 per cent after a preliminary reading on third-quarter gross domestic product showed growth slowing. The energy segment was the hardest-hit, in line with the wider trading pattern across global markets.

Hong Kong’s Hang Seng is down 0.8 per cent.

Forex and fixed income

The euro is up 0.3 per cent at $1.1831, extending gains driven by robust German economic growth data for the third quarter, and benefiting from a trend for a weaker dollar.

As investors continue to wait for signs of progress on US tax reform, the index tracking the world’s reserve currency is down 0.3 per cent at 93.597.

Japan’s yen firmed as much as 0.4 per cent to ¥113.03 per dollar as equity benchmarks in Tokyo fell.

Stock market losses are helping bolster sovereign bonds, driving down yields. Yield on 10-year US Treasuries is 3.8bp lower at 2.34 per cent. German 10-year Bund yields are down 2.5bp at 0.372 per cent.

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