BLBG : European Stocks, U.S. Futures Fall; China Enters Bear Market
Aug. 19 (Bloomberg) -- European and Asian stocks fell and U.S. index futures retreated as lower metals dragged down commodities producers and China’s Maanshan Iron & Steel Co. posted a second straight half-year loss. The Shanghai Composite Index entered a bear market.
BHP Billiton Ltd. slid 1.1 percent as lead, tin and nickel slipped on the London Metal Exchange. Maanshan fell 7.5 percent after announcing a 795.4 million yuan ($116 million) net loss.
The MSCI World Index sank 0.5 percent as of 9:41 a.m. in London. The gauge of 23 developed nations has rallied 51 percent since March 9 as companies from GlaxoSmithKline Plc to Intel Corp. reported better-than-estimated results and Germany and France unexpectedly returned to economic growth.
“Markets globally were getting on for 60 percent up from their low so you shouldn’t really be too surprised if you see some pullback” in stocks, Richard Cookson, the London-based head of global asset-allocation research at HSBC Holdings Plc, said on Bloomberg Television. “I’m extremely wary about equity markets at this point,” said Cookson, who has an “underweight” position on developed-market stocks.
Europe’s Dow Jones Stoxx 600 Index lost 1.2 percent. The 42 percent rally since March 9 has left the measure valued at 40.2 times the profits of its companies, near the most expensive level since 2003, weekly data compiled by Bloomberg show.
Standard & Poor’s 500 Index futures expiring in September slipped 1 percent, while the MSCI Asia Pacific Index decreased 0.7 percent as Maanshan sank 7.5 percent to 4.81 yuan.
Chinese Bear Market
China’s Shanghai Composite Index fell as much as 5.1 percent, a 20.5 percent retreat from this year’s high on Aug. 4, on concern the nation’s economic recovery will falter as the government reins in lending. A slump of at least 20 percent on an index is commonly defined as a bear market.
The Shanghai gauge has foreshadowed moves in global equities for the past two years. It peaked on Oct. 16, 2007, two weeks before the MSCI All-Country World Index. The Chinese index fell 72 percent from its 2007 high and bottomed out on Nov. 4, 2008, four months before the all-country gauge. Stocks in Shanghai reached their 2009 high on Aug. 4, seven trading days before the global index.
Prime Minister Wen Jiabao’s 4 trillion yuan stimulus package, coupled with record bank lending in the first six months, helped the Shanghai index to more than double this year from the low on Nov. 4. The rally faltered as new loans in July declined to less than a quarter of June’s level, the regulator allowed initial share sales after a nine-month moratorium and companies including Yunnan Copper Industry Co. reported losses.
‘Over-Egged’
“The expectations linked to growth seem to be over-egged” in China, HSBC’s Cookson said. “Also there’s some realization that the recovery in the United States is very anemic.”
Bank of England Governor Mervyn King and two other policy makers were overruled in a push to expand the bank’s bond- purchase program to 200 billion pounds ($329 billion) as the majority favored a smaller amount, according to minutes of the Aug. 6 decision released by the central bank today.
Global equities rebounded from the worst drop since April yesterday, following better-than-estimated earnings at Home Depot Inc. and Target Corp. and an increase in German investor confidence.
BHP, the world’s largest mining company, slid 1.1 percent to 1,494.5 pence as copper retreated 2 percent on the LME.
ENRC Rallies
Eurasian Natural Resources Corp. limited declines among European mining companies as the producer of ferrochrome, aluminum and iron ore in Kazakhstan reported earnings that exceeded analysts’ estimates.
ENRC posted a 59 percent drop in first-half net income to $553 million. That beat the $315 million median estimate of three analysts Bloomberg surveyed. The shares rallied 9.8 percent to 853 pence.
Telekom Austria AG gained 3.7 percent to 11.10 euros even as second-quarter net income fell to 82.3 million euros ($116.5 million). Austria’s biggest phone company reiterated that it expects earnings before interest, tax, depreciation and amortization of around 1.9 billion euros this year.
Per-share Earnings for companies in the Stoxx 600 have slumped 38 percent in the second quarter, while less than half of profits have topped analysts’ projections, according to data compiled by Bloomberg.
