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Global stocks decline with oil, emerging markets darken on looming Fed

A man walks past an electronic stock board of a securities firm in Tokyo Friday, Dec. 11, 2015.

In the countdown towards the?Fed decision next week, markets are looking gloomy.?Shares in third world countries are heading for a long slump since June, European stocks are at a two-month low and oil?is going to its worst week since March.

Emerging-market equities fell to have an eighth day amid speculation higher U.S. rates will trigger outflows from riskier assets. South Africa’s rand was poised for its biggest weekly slump because the global financial crisis erupted in 2008?and China’s yuan had was on target for the steepest weekly drop since its August devaluation. European stocks dropped for a fourth day and U.S. futures slid. While oil declined for a sixth day in New York, industrial metals rose amid plans to cut back output.

“Emerging markets are reacting to?uncertainty over what’s going to happen once the Fed raises rates in environment of global deflation driven by China,” said Simon Quijano-Evans, the London-based chief emerging-market strategist at Commerzbank AG.

Emerging-market equities are headed for another weekly decline amid a slump in commodity prices to a 16-year low, concern that China’s slowdown will spread and also the potential increase in U.S. borrowing costs. Traders are pricing inside a 76 per cent chance that the Fed will raise rates at its Dec. 16 meeting, with economist surveys indicating that data from the U.S. Friday will show stronger growth in retail sales and producer prices for November. China is a result of post data on retail sales, industrial production and financing on Saturday.

Emerging Markets

The MSCI Emerging Markets Index dropped 1.6 percent, at risk of the lowest close since September, by 6:37 a.m. in New York. The gauge dropped 4.4 per cent within the week, the largest decline for the period in 2 1/2 months. Equity benchmarks in Indonesia, Turkey and Nigeria lost more than 1.5 per cent on Friday.

The Hang Seng China Enterprises Index sank 1.5 per cent, its seventh day of losses and?the Shanghai Composite Index slid 0.6 per cent to a five-week low. Fosun International Ltd. bonds plunged after Caixin magazine reported that billionaire Chairman Guo Guangchang was unreachable. Trading in its shares was halted.

More than 30 senior executives of listed Chinese companies go missing or faced government probes this year, according to the state-run Securities Times.

A gauge of 20 developing-nation currencies fell 0.5 percent, sliding 1.8 percent within the week, the worst performance for that period in 3 months.

The rand weakened for a seventh day within the longest slump since 2013, losing 1.7 per cent. The currency has tumbled 8.7 percent now, the most since the period ended Oct. 24, 2008, after?President Jacob Zuma abruptly fired his finance minister without giving reasons, strengthening his grip on power amid differences over government spending.

The ruble fell 1.1 percent on Friday. The currency stayed lower following the Bank of Russia kept interest rates on hold, as predicted by?22 from the 36?economists surveyed by Bloomberg. Turkey’s lira dropped 1.2 per cent.

The yuan fell 0.27 percent in Shanghai, taking its five-day loss to 0.83 per cent,?on speculation China’s central bank takes benefit of a stronger dollar to weaken the currency prior to the U.S. raises rates. The People’s Bank of China cut the yuan’s daily reference rate by 0.8 per cent this week, probably the most because it devalued the currency in August and made the fixing mechanism more market-oriented.

Malaysia’s ringgit halted a three-week advance as a drop in crude prices to under US$40 a barrel compounded pressure on Asia’s only major net oil exporter and clouded the outlook for government finances.
Stocks

More than 10 shares declined for each one that advanced in the Stoxx Europe 600 Index, which slid 1.4 percent. The benchmark measure has lost 7.One in December amid a rout in commodity companies and disappointment within the European Central Bank’s last meeting. It advanced in the final month in five of history six years.

Eurofins Scientific SE tumbled 9.5 per cent after canceling a share sale, citing poor market conditions. Suez Environnement Co. rose 0.9 per cent after Les Echos reported that Engie, its biggest shareholder, is considering managing the organization.

U.S. stock-index futures dropped, with contracts around the Standard & Poor’s 500 Index falling 0.2 percent, following the index halted a three-day slide on Thursday.

Commodities

Oil headed for the largest weekly decline since March amid speculation OPEC’s decision to effectively scrap production targets could keep the marketplace oversupplied. The worldwide oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximise output, the International Energy Agency said in a report released Friday. West Texas Intermediate crude dropped 1 per cent to US$36.38 a barrel.

Most industrial metals gained, with copper rallying probably the most two weeks, amid speculation that China’s state stockpiling agency planned to purchase material, which may help soak up surplus supplies. Aluminum climbed for any third day after China’s smelters agreed to not expand capacity.

Copper had the most negative outlook in a Bloomberg commodities outlook survey, with 18 respondents saying they were bearish for 2016, while eight were bullish and four were neutral.

Iron ore fell 0.6 per cent to US$38.30 a lot, based on a cost index compiled by Metal Bulletin.
Currencies

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose 0.1 percent because of its fourth daily increase now?and is up 0.3 percent since Dec. 4.

The dollar advanced for a second day against the yen. Australia’s dollar weakened 1 per cent after jumping 0.7 per cent last session with an unexpected rise in employment. The euro was 0.3 percent stronger at US$1.0971.

Bonds

From the U.S. to Greece to Japan, all major developed government bond financial markets are poised to finish 2015 with a gain even while the Fed prepares to raise rates of interest.

All 26 markets tracked by Bloomberg are poised to create positive returns this season. Greek bonds led the gains by having an 18 percent rally following the nation received a global bailout. Treasuries advanced 1 per cent. Government securities also rose in Japan, Germany and Switzerland, pushing yields on some maturities in those nations below zero.

U.S. 10-year yields fell two basis points to 2.22 percent on Friday, in contrast to 2.17 percent on Dec. 31, 2014. The yield on similar-maturity German bunds what food was in 0.56 per cent.

Bloomberg News

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