Weak China data, stronger dollar send
global stocks skidding
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[October 13, 2016]
By Marc Jones
LONDON (Reuters) - World stocks stumbled
to three-week lows on Thursday and developed market bond yields dipped,
after Chinese data showed a sharp decline in exports, reviving concerns
about the health of the world's second-biggest economy.
Riskier assets have had a difficult few weeks, undermined by
concerns about a potential rise in U.S. interest rates, the outcome
of U.S. elections, Britain's departure from the EU and the health of
German and Italian banks.
Asia's markets suffered falls overnight after data showed Chinese
imports in dollar terms were back in contractionary territory in
September, while exports dropped by a sharper-than-expected 10
Europe opened with a thud too, with falls of 0.7-1.3 percent for
Britain's FTSE, Germany's DAX and France's CAC pulling the
pan-regional STOXX 600 down for a third day running and the sixth
day in the last seven.
"We have got a stronger dollar and that is the market now pricing in
the likelihood of a December U.S fed rate hike," said Rabobank
currency strategist Jane Foley.
"The other theme is the weakness of Chinese exports. That does help
turn the spotlight on the recent weakness of the yuan. Then of
course there is sterling."
Bets on a Federal Reserve move remained broadly unchanged after
minutes from the U.S. central bank's last meeting had shown
policymakers still grappling over timing, but on balance inching
closer to a hike.
The minutes said "it was noted that a reasonable argument could be
made either for an increase at this meeting or for waiting for some
additional information on the labor market and inflation."
It was just enough uncertainty to pull the dollar off a 2-1/2-month
high versus the yen - it traded at 103.80 yen - and push ten-year
yields on U.S. government debt down 5 basis points to 1.74 percent,
a relatively large move out of U.S. hours.
There was no such reprieve for Britain's pound as it fell to $1.2150
and to 90.5 pence per euro, extending a slump of 15 percent or more
since the UK's June vote to leave the EU.
The impact of the plunge was starting to show beyond the market too,
as the UK's largest supermarket Tesco started taking some of the
products from one of its biggest suppliers Unilever off its shelves
after refusing to accept a 10 percent price hike.
The spat sent both firms' shares down 2.3 percent. [.EU] "Clearly
Unilever won't be the only company wanting to pass on a 10 percent
or similar price increase due to the fall in the pound," Rabobank's
The euro dropped under $1.10 for the first time in almost three
months as the dollar pressure was compounded by a Reuters report
that the ECB was considering a number of changes to its 1.5 trillion
euro bond buying program.
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Traders work at their desks in front of the German share price
index, DAX board, at the stock exchange in Frankfurt, Germany,
October 12, 2016. REUTERS/Staff/Remote
Sources at the central bank said options included occasionally
buying bonds with yields lower than its -0.4 deposit rate and
occasionally deviating away from rules on which countries' bonds it
The poor batch of Chinese trade numbers sent the offshore version of
the country's yuan close to lows last reached in a dramatic sell-off
in January and to a six-year trough in the tightly controlled
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1
percent, touching its lowest since Sept. 19. Hong Kong stocks fell
1.2 percent and Japanese shares were down 0.4 percent thanks to a
"The China data has exacerbated the broad cautious mood and we
should see more gains for the yen and other safe-haven assets," said
a currency trader at an Asian bank in Hong Kong.
The CBOE Volatility Index, the "fear gauge" of near-term investor
anxiety, held around 16, indicating broader market uncertainty.
Within Asia, the Thai baht was also in focus after falling to an
eight-month low in the previous session on concerns about the health
of 88-year-old King Bhumibol Adulyadej. The health of the world's
longest reigning monarch has "overall not yet stabilised", the
palace said on Wednesday.
Oil prices struggled following a 1 percent drop overnight after the
Organization of Petroleum Exporting Countries reported its output
hit an eight-year high in September, offsetting optimism over a
pledge to restrict output.
U.S. West Texas Intermediate crude slipped 0.8 percent to trade at
$49.78 a barrel.
Copper and other industrial metals were flushed lower by the China
jitters [MET/L], while safe-haven gold edged up to $1,257 an ounce
following a 6 percent slump over the last three weeks.
(Reporting by Marc Jones; editing by John Stonestreet)
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