Stocks, Oil Fall as Manufacturing Data Underwhelm; Rupee Drops – Bloomberg

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Lackluster.

That’s about the best that can be said of the global growth outlook, based on the response in stocks and commodities markets to Wednesday’s manufacturing data.

The Stoxx Europe 600 Index declined to a one-week low, the MSCI Asia Pacific Index halted a five-day winning streak and copper fell by the most in three weeks. The yen strengthened the most in a month as Japan delayed a planned sales-tax hike, while India’s rupee dropped after a local-language newspaper reported that central bank Governor Raghuram Rajan doesn’t want an extension of his term. Crude oil slipped toward $48 a barrel before an OPEC meeting on Thursday. The pound weakened for a second day on speculation a vote for Brexit is becoming more likely.

China’s purchasing managers’ indexes for May added to evidence that growth remains subdued after the economy expanded last year at the slowest pace in more than two decades. Similar manufacturing gauges for the euro area and U.K. pointed to mediocre expansion, while a gauge for the U.S. is also due Wednesday. Polls showing an increased risk that the U.K. will vote to leave the European Union in a June referendum are also making investors wary.

“The recovery in Europe is not accelerating and we have a very, very heavy week for data and events still ahead of us, so you can forgive people for a wait-and-see mood,” said William Hobbs, head of Europe, Middle East and Africa investment strategy at the wealth-management unit of Barclays Plc in London. “Markets are trapped a little bit, people are worried about geopolitics and the British referendum. This is keeping investors on the sidelines in case the worst-case scenario comes through.”

China’s official manufacturing PMI for May was 50.1, just above the dividing line between improvement and deterioration, while a Markit Economics gauge for the euro area slipped to 51.5 from 51.7. A comparable indicator for Japan was the lowest in at least three years and Prime Minister Shinzo Abe pushed back a proposed increase in the country’s sales tax to 2019. Investors are also looking to Thursday, when the European Central Bank announces its interest rate decision and President Mario Draghi provides an update on its policy stance at a press briefing.

Stocks

The Stoxx Europe 600 Index lost 0.9 percent at 11:07 a.m. in London. 

Mining-related companies fell the most of its 19 industry groups as commodity prices retreated. Elekta AB tumbled 7.5 percent after the Swedish maker of medical devices posted disappointing fourth-quarter revenue and profit, and forecast weak results for the first half of the year. Royal Ahold NV rose 3.1 percent after the Dutch grocery chain that’s merging with Delhaize Group reported first-quarter profit that topped analysts’ predictions.

Futures on the S&P 500 declined 0.3 percent, after the index posted its third straight monthly gain. After the U.S. manufacturing data, a payroll report on Friday will be parsed for clues as to whether the world’s biggest economy can cope with a potential rate increase this month or next.

Reports Tuesday showed U.S. consumer spending climbed in April by the most in almost seven years, while confidence fell. 

The MSCI Emerging Markets Index was little changed, as were Chinese equity benchmarks in Hong Kong and Shanghai, while gauges in the Philippines, Indonesia and Taiwan climbed at least 0.7 percent.

Japan’s Topix index slid 1.3 percent even as Softbank Group Corp. climbed to its highest in more than a month in Tokyo after announcing plans to sell at least $7.9 billion of its stake in Alibaba Group Holding Ltd.

Currencies

The yen strengthened 1 percent as Prime Minister Abe told lawmakers he will “mobilize fiscal policy to achieve strong growth.”

“Abe has already decided on the sales tax and he said he will come up with more fiscal stimulus,” said Roy Teo, a senior currency strategist in Singapore at ABN Amro Bank NV. “From that perspective perhaps the market is speculating that with more fiscal stimulus in the pipeline then the BOJ may delay further easing policies. If the BOJ delays then it’s positive for the yen.”

The pound declined 0.2 percent to $1.4455 after dropping 1.1 percent on Tuesday, when ICM opinion polls released by the Guardian showed a lead for the campaign to take Britain out of the EU. A gauge of the pound’s one-month volatility versus the dollar climbed to 20 percent on Wednesday, the highest since 2009.

The Bloomberg Dollar Spot Index declined 0.3 percent, after a 3.7 percent surge in May that marked its biggest monthly gain since September 2014. The odds of the Federal Reserve raising interest rates in June almost tripled last month to 34 percent, while the chance of a move by July roughly doubled to 54 percent, Fed Funds futures show. The euro advanced 0.2 percent versus the greenback before a European Central Bank policy meeting on Thursday.

The yuan erased a decline of as much as 0.2 percent that took it close to a five-year low, while New Zealand’s currency rose 0.6 percent after a gauge of the nation’s terms of trade increased by more than economists forecast.

The rupee weakened as much as 0.3 percent, according to prices from local banks compiled by Bloomberg. Rajan has told the government he doesn’t want to continue as central bank chief after his term ends in early September, Bengali-language newspaper Anandabazar Patrika reported on Wednesday, citing unidentified sources close to Rajan. Prime Minister Narendra Modi wants him to stay on, the report said.

Commodities

The Bloomberg Commodity Index slid 0.7 percent, falling for a second day.

West Texas Intermediate crude fell 1.5 percent to $48.35 a barrel, after climbing for a fourth month in May. The Organization of Petroleum Exporting Countries is unlikely to reach an agreement limiting production at this week’s meeting in Vienna as the group sticks with Saudi Arabia’s strategy of squeezing out rivals, according to analysts surveyed by Bloomberg. The global surplus that has caused prices to slump since 2014 is correcting itself, the oil minister of the United Arab Emirates said Tuesday.

Copper declined 1.7 percent in London, while zinc, lead and tin were down at least 0.9 percent.

Bonds

Treasury 10-year notes eked out gains for a second day, with the yield falling one basis point to 1.84 percent. German bunds also pushed higher, while Italian and Spanish securities declined.

Japan’s 20-year bonds declined, pushing their yield up by one basis point to 0.255 percent, after the central bank scaled back purchases of super-long tenors in its debt-buying plan for this month. Notes due in 30 years and 40 years also declined.

South Korea’s three-year bond yield dropped six basis points to 1.445 percent, below the Bank of Korea’s record-low benchmark rate of 1.5 percent. Exports shrank for a 17th straight month, data showed Wednesday, fueling speculation the central bank will reduce interest rates for the first time in a year.