New York - Crude oil slid for a seventh day, dropping toward $30 a barrel in New York, and industrial metals sank, dragging down the currencies of raw-material producing nations and stocks in the Middle East.
While European equities rose for the first time in five days, mining stocks fell and the MSCI All-Country World Index headed for its lowest close since September 2013. Government bonds fell before debt sales and credit markets weakened. The Chinese yuan traded in Hong Kong rallied as much as 0.7 percent, erasing its discount to the onshore rate, as the state sought to ward off speculators.
Concern that turmoil in China’s stocks and currency will spread to the economy helped spur declines in global markets this year, pushing crude 17 percent lower since December 31. China stepped up its defense of the yuan on Tuesday, sparking a record surge in Hong Kong’s money-market rates to deter bearish bets. Alcoa slipped in after-hours trading after opening the US earnings season with an 18 percent drop in sales.
“The moves in oil and the rest of the commodities have been so extreme that producing companies and countries are feeling the heat,” Andy Pfaff, the chief investment officer for commodities at MitonOptimal Group, said by phone from Cape Town. “No region is immune, everyone is impacted in some way by falling commodity prices.”
Commodities
West Texas Intermediate oil slid 1.7 percent to $30.87 a barrel at 9:29 a.m. London time after falling to the lowest level since December 2003. Contracts on Brent crude dropped 1.5 percent to $31.09 in London.
Copper dropped 0.2 percent, while tin and nickel declined more than 1 percent.
Currencies
The Australian and New Zealand dollars slipped about 0.2 percent. Britain’s pound fell against all its major counterparts after data showed UK industrial production unexpectedly contracted in November.
The yuan traded in Hong Kong temporarily erased a gap with the Shanghai exchange rate that widened to a record 2.9 percent last week. The People’s Bank of China repeatedly intervened in the offshore market on Tuesday, according to people familiar with the matter, following efforts to talk up the currency from two senior government officials on Monday.
The cost of borrowing China’s currency overnight in Hong Kong’s interbank market jumped by 53 percentage points to 66.82 percent, more than five times the previous record reached on Monday. Comparable rates with tenors of up to a year all surged by records to unprecedented levels.
Stocks
The Stoxx Europe 600 Index rose 0.8 percent. The MSCI All- Country World gauge dropped 0.1 percent, extending its loss this year to 6.7 percent.}
BHP Billiton, the world’s biggest mining company, sank 2.5 percent in London to the lowest since 2005.
Japan’s Topix index tumbled 3.1 percent in a sixth day of declines. Australia’s S&P/ASX 200 Index fell 0.1 percent in its longest losing streak since 2010.
The Shanghai Composite Index rose 0.2 percent after dropping below the 3 000 level for the first time since September. The gauge sank 5.3 percent on Monday, extending the world’s biggest selloff this year, even after state-controlled funds intervened in the market last week.
“Everyone rational wants to sell, while everyone official has been told to buy,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. “By throwing good money after bad, it just delays the inevitable.”
The Hang Seng China Enterprises Index dropped 0.8 percent to trade at 6.3 times trailing earnings, the cheapest level in 14 years. Hong Kong’s Hang Seng Index slid to its lowest level since September 2012.
Standard & Poor’s 500 Index futures rose 0.2 percent, after the index ended last session up 0.1 percent amid volatile trading conditions.
-With assistance from Emma O'Brien.
BLOOMBERG