US Stocks Halt Global Equities Rally as Oil Advance Falters

Nedw York (Jan 16)  US stocks halted a two-day advance as a rally in crude faltered and Treasuries erased losses, providing a fresh signal that China-fueled turmoil on financial markets has yet to fully subside.

The Standard & Poor’s 500 Index extended declines after European markets closed modestly higher. The yield on the 10-year Treasury note fell to 2.09 percent, while gold erased losses to trade above $1,090 an ounce. Oil was little changed at $30.50 a barrel. Emerging-market rose after closing at the lowest level in six years, while Asian stocks rebounded from a three-year low on Chinese trade data.

Oil’s renewed rout overwhelmed the budding rebound in global equities, which have been hammered this year amid concern China is struggling to manage its slowing economy. While the tumult seen in financial markets last week had shown signs of receding since Chinese policy makers intervened to stabilize the yuan, demand for havens returned Wednesday as U.S. equities failed to add to global stock gains.

“If this week has shown us anything, it’s that no gain is safe,” said Thomas Garcia, head of equity trading at Thornburg Investment Management Inc. in Santa Fe, New Mexico. “We’ve been taking our cues from what’s been going on from China, but people seem to be getting numb to that. When Europe closes, the U.S. does its own thing. Equities have just been out of favor early on this year.”

Stocks

The S&P 500 fell 0.5 percent at 12:04 p.m. in New York, with losses extending after Europe’s markets closed at 11:30 a.m. The gauge opened higher by as much as 0.6 percent. It’s now down more than 5.5 percent this year after slipping 0.7 percent in 2015.

The Stoxx Europe 600 Index rose 0.4 percent, paring a gain of more than 1 percent. The benchmark is poised for its first consecutive gains in four weeks. Commodity producers rose from a 12-year low, with Glencore Plc and Rio Tinto Group climbing more than 3 percent. A gauge of oil-and-gas companies snapped a nine-day losing streak as Total SA and BP Plc rallied, while Tullow Oil Plc jumped 8 percent after saying it plans to reduce capital expenses this year.

The MSCI Asia Pacific Index climbed 1.9 percent, halting a seven-day drop that marked its longest run of losses since August. Japan’s Topix index rallied from its lowest level since September, advancing 2.9 percent, and Hong Kong’s Hang Seng Index rose 1.1 percent.

The Shanghai Composite Index fell 2.4 percent, closing below 3,000 for the

first time since August. Mainland stocks failed to join in a global rebound amid concern large corporate shareholders may take advantage of rallies to sell equities, according to JK Life Insurance Co.

Commodities

The Bloomberg Commodity Index rose 0.4 percent, recovering after falling to the lowest since at least 1991 on Tuesday on a glut of raw materials including natural gas and nickel.

Oil rose 0.7 percent to $30.67 a barrel in New York, after its attempt to bounce back after tumbling below that level on Tuesday for the first time in 12 years was initially foiled. West Texas Intermediate is in the midst of the longest run of declines since July 2014.

Copper was among the industrial metals gaining on China’s trade data. The metal, used in power cables, rose 0.7 percent to $4,382 a metric ton on the London Metal Exchange. Gold for futures fell 0.1 percent to $1,084.60 an ounce.

Currencies

The yuan strengthened in Hong Kong’s offshore market, headed for the biggest five-day advance on record after China intervened to support the currency. The central bank kept its reference rate almost unchanged for the fourth day in a row, helping calm investor nerves after an eight-day run of weaker fixings.

Japan’s yen, which has benefited from demand for haven assets this year, dropped 0.4 percent to 118.16 per dollar. High-yielding currencies gained, with the Australian dollar strengthening at least 0.5 percent. The rand, which tumbled to a record low at the beginning of the week, rallied 1.2 percent.

Bonds

U.S. Treasuries took back some of the last session’s advance before an auction of $21 billion of 10-year notes, which is due to be followed Thursday by sale of $13 billion of 30-year bonds. The 10-year yield increased one basis point to 2.12 percent. Treasuries returned 1 percent this month through Tuesday, versus 0.9 percent for all of 2015, based on Bloomberg World Bond Indexes.

The yield on the German bund maturing in August 2025 fell two basis points, or 0.02 percentage point, to 0.51 percent. Italy’s 10-year yield dropped seven basis points to 1.54 percent, the biggest drop in more than two weeks.

Emerging Markets

The MSCI Emerging Markets Index rebounded 1.3 percent from the lowest close since 2009, trimming the worst start to a year since 1998. Benchmarks in South Korea, the Philippines, Thailand and Turkey climbed at least 1.3 percent. Russian stocks rose for a second day, increasing 0.5 percent.

A gauge of 20 emerging-market currencies added 0.3 percent, ending an eight-day slump. The ruble gained for the first time in five days, appreciating 0.9 percent.

Sourtce: Bloomberg