On 28 September, 2015 – Markets retreat on China concerns

Stocks retreated globally as traders worried about the weakness in China’s economy as the third quarter draws to a close.
United States
United States markets followed global markets lower Monday. Traders were concerned once again about China’s weak economy. The Dow Jones industrials were down 1.9%, the S&P declined 2.6% and the Nasdaq lost 3.0%. Stock markets have been turbulent in recent weeks amid confusion over the Federal Reserve’s tightening policy and concern over a slowdown in Asia. Data today showed profits of Chinese industrial companies declined the most since the country’s government began compiling data in 2011.
Alcoa bucked the downward trend after announcing that it would split into two independent companies. Its bauxite, aluminum and casting operations will be in one company and its engineering and transportation businesses will be in another. Shares in Glencore slumped to a record low after an investment bank warned that the company faced a bleak future if commodity prices did not recover. In a note, Investec Securities said mining companies “gorged themselves on cheap debt” in a race to increase production after the Chinese stimulus stemming from the global financial crisis and that Glencore could see all its equity value “evaporate” if major commodity prices stayed at current levels.
Drug makers extended the sell-off that began last week. The health care sector took the heaviest losses as the drumbeat of criticism over drug-price increases heats up. Economically sensitive sectors were stuck deep in negative territory. Materials and energy dropped on the back of declines in energy and metals futures.
Federal Reserve Bank of New York President William C. Dudley said today the Fed will “probably” raise interest rates later this year despite uncertainties over global growth. “I think that the economy is doing pretty well,” Dudley said at an event in New York. He said he expected growth in the second half will be “a little bit weaker” than in the first half.
Gold at the afternoon London fixing was down US$15.60 to US$1,131.05. Copper futures were down 1.6% to US$2.25. WTI spot crude was down US$1.20 to US$44.50. Dated Brent spot crude was down US$1.22 to US$47.38. The US dollar was up against the pound and the Canadian and Australian dollars. However, it declined against the euro, yen and the Swiss franc. The Dollar Index was down 0.2%. The yield on US Treasury 30 year bond was down 8 basis points to 2.88% while the yield on the 10 year note declined 6 basis points to 2.10%.
Europe
European markets retreated Monday. Concerns about China returned to the forefront after the nation released some disappointing economic data. These worries in turn, prompted further weakness in commodity prices which weighed heavily on European mining stocks. Automakers also remained under pressure due to the Volkswagen emission scandal. The FTSE lost 2.5%, the CAC dropped 2.8%, the DAX declined 2.1% and the SMI was 1.5% lower.
International Monetary Fund Managing Director Christine Lagarde said the global growth outlook is likely to be revised down due to weak expansion in emerging economies. Emerging economies are no longer pulling the recovery, while developed countries are gaining momentum according to Lagarde. However, growth of 3.3% this year is no longer realistic, nor is 3.8% global growth next year. Nonetheless, she expects growth to remain above the 3% threshold.
Lanxess and Basf were lower. K+S also decreased. Basf announced a new cost cutting program, adding that it plans to reduce capital expenditures. Volkswagen sank after German prosecutors launched a criminal investigation against the former CEO Martin Winterkorn and other unnamed executives. Daimler, BMW, Peugeot and Renault also declined. Banks including Deutsche Bank, Commerzbank, Société Générale, BNP Paribas and Crédit Agricole were down on the day. SABMiller climbed after The Sunday Times reported that Belgian brewer Anheuser-Busch InBev NV, known as AB InBev, could make a takeover bid worth about US$106 billion for the British brewer. Vodafone retreated after the telecom giant said its discussions with cable company Liberty Global have been terminated. Glencore plunged after Investec Securities reportedly said in a report that if commodity prices don’t rebound, the value of Glencore’s stock is “virtually eliminated.” Anglo American and BHP Billiton declined. Rio Tinto and Antofagasta also were lower. Standard Chartered, Barclays lost 3.82%, Royal Bank of Scotland and HSBC tumbled.
Asia Pacific
Stocks were mixed Monday in cautious trading as investors digested soft Chinese industrial profits data and looked ahead to some key data this week from China and Japan to gauge the outlook for regional growth. Traders also are awaiting Eurozone inflation and US employment data this week to see if the currency markets will fall victim to policy divergence between the US Federal Reserve and the European Central Bank.
The Shanghai Composite added 0.3% as gains among technology stocks helped offset concerns over the economy. Profits earned by Chinese industrial enterprises declined 8.8% on the year in August, the most in at least four years and worse than the 2.9% decline in July, rekindling growth worries. Trading activity was relatively thin as investors looked ahead to Thursday when the CFLP September PMI and the final Caixin/Markit PMI will be released. Also, the Chinese market will be closed for one week starting Thursday for the National Day Golden Week holidays. Markets in Hong Kong were closed Monday.
The Nikkei retreated 1.3% as the safe haven yen strengthened against major peers and a raft of stocks traded ex-dividend. Also, caution crept in ahead of key economic data including industrial production that are scheduled this week. A stronger yen weighed on export oriented stocks, with Canon, Honda Motor, Toyota, Mazda Motor, Fanuc and Sony all declining. Suzuki Motor dropped after selling its entire 1.5% stake in Volkswagen AG to Porsche Automobil Holding. Nippon Paper Industries slumped on a Nikkei report that its April to Sept operating profit has likely dropped about 30%.
The S&P/ASX was up 1.4% while the All Ordinaries added 1.3%. Banks advanced while miners were mixed. The Sensex dropped 1.0% ahead of the Reserve Bank of India’s monetary policy announcement. The RBI is expected to cut its key repo rate by at least 25 basis points, but investors’ focus would be squarely on the tone of the central bank at a time when both the WPI and retail inflation are falling.
Singapore’s FTSE Straits Times Index dropped 1.4% into bear territory — defined as a 20% fall from a recent peak. Stocks in Singapore, a commodities-trading hub, have come under fire as signs that China’s economy is slowing more quickly than expected have sent commodities prices tumbling. Markets in South Korea were closed for a public holiday.
Global Stock Market Recap

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
The Reserve Bank of India announces its monetary policy decision. September EC economic sentiment will be released. In the US, August international trade in goods, July S&P Case/Shiller house price index and September consumer confidence will be reported.
*Note — all releases are listed in local time.