Growth fears hit shares and oil, gold stable
London, April 17, 2013
World shares and industrial commodities fell on Wednesday as global growth concerns overwhelmed support from the prospect of ongoing central bank stimulus in the US and Japan.
The growing belief the Federal Reserve will maintain its easier stance amid signs of weak U.S. inflation also helped gold to recover from Tuesday's more than two-year low following three days of heavy selling.
Growth concerns have been heightened by the latest report of the International Monetary Fund, which cut its forecasts for the world economy this year and next, citing the impact of government spending cuts in the U.S. and the worsening situation in Europe.
"There is a bit of a lack of confidence in the outlook, also reinforced by the IMF report," Standard Chartered analyst Daniel Smith said.
U.S. shares, which rose more than 1 percent on Tuesday, looked set to reflect the growing uncertainty in the outlook with futures pointing to a weak start on Wall Street despite recent positive corporate earnings reports.
In Europe the broad FTSEurofirst 300 index extended a three-day losing streak to fall 1.1 percent by midday, while London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were as much as 1.9 percent lower.
Earlier MSCI's broadest index of Asia-Pacific shares outside Japan had gained 0.4 percent, rebounding from a sharp sell-off on Tuesday when it fell as much as 1 percent to near its 2013 low.
MSCI's world equity index, which tracks shares in 45 countries, dipped 0.15 percent to 359.4 points, reversing some of the previous day's sharp gains.
Gold, which has posted its biggest falls in over 30 years since last Friday, was last trading at $1,372.85, up around 0.4 percent, having risen as much as 1.1 percent during the day.
"You'd expect to see a bounce after that kind of a move," said Citigroup metals strategist David Wilson, who expects gold to stay under pressure.
"The reason investors have been walking away from gold is that the fear of inflation driven by the expansion in central bank balance sheets is simply not there."
Other industrial commodities such as copper and oil, while supported by the easy Fed and BOJ monetary policies, were weighed down by the worries about future demand levels, with global growth seen sluggish.
Three-month copper on the London Metal Exchange eased 1 percent to stand at $7,210 a tonne, and has now fallen more than 8 percent this year.
BRENT DROPS BELOW $99
Brent crude fell below $99 per barrel on Wednesday, weighed by the prospect of sluggish fuel demand in top consumers the US and China and rising stockpiles of U.S. crude.
More bleak economic news came courtesy of the International Monetary Fund (IMF), which trimmed projections for this year and next - implying limited upside for oil demand growth.
The North Sea benchmark has lost nearly 6 percent over the past five sessions in a wider commodities rout triggered by data showing growth in China, the world's second largest oil burner, had slowed unexpectedly in the first three months of 2013.
The head of the International Energy Agency, Maria van der Hoeven, said the oil price decline was proof that the market was adequately supplied.
In the currency markets the Japanese yen resumed its fall against the euro and the dollar as traders anticipated flows out of Tokyo by investors looking for higher returns due to the central bank's aggressive policy-easing plans.
The dollar gained 0.15 percent to 97.70 yen but was still down about 1.5 percent from a four-year high of 99.95 yen set last week. The euro rose 0.25 percent to 128.25 yen , below last week's three-year peak of 131.10 yen.
"Over the next couple of days we might see some consolidation around current levels, but with the easing from the BOJ we think the dollar will trade higher versus the yen," said Marcus Hettinger, global FX strategist at Credit Suisse.
The euro fell against the dollar to $1.3130 on Wednesday, dragged down by a media report citing a former European Central Bank board member voicing concerns about the single currency's recent gains.
Currency traders' attention is turning to a meeting of finance officials from the Group of 20 leading nations beginning in Washington on Thursday for any signs of concern about the yen's weakness.
In the debt market the focus was on a German auction of 3.35 billion euros of 10-year debt, which saw good demand, supported by investors' expectations that the European Central Bank will cut interest rates in the next few months.
Anticipation that Germany's safe-haven debt will also benefit from Japanese investors switching out of their ultra-low yielding domestic bonds added to its attraction. Yields at the auction were in line with a previous sale in March at around 1.36 percent. – Reuters