(Bloomberg) — Global stocks slipped as signs of resilience in the U.S. labor market and comments from the Bank of England rekindled concern the Federal Reserve will raise interest rates even as China’s slowdown threatens global growth.
U.S. stocks fluctuated as a gain in crude bolstered energy shares. Equities from Asia to Europe slipped on renewed worry a U.S. rate hike as soon as next week would damp growth, while billionaire investor David Tepper raised concern that corporate earnings expectations in America have gotten bloated. A two-day rally in Chinese shares faltered and a downgrade of Brazil’s debt to junk underscored weakness in developing nations.
A rebound in global stocks this week ended in the U.S. on Wednesday after a jobs report bolstered the case for higher rates. Data Thursday added to that sentiment. The Bank of England said turmoil on the global financial markets hasn’t shaken its economic outlook, fueling speculation the Fed may also look past recent turbulence at its policy meeting next week.
“We’ve stopped most of the panic about China collapsing and the world falling apart,” said Ben Kumar, who helps oversee about $14 billion as a money manager at Seven Investment Management in London. “The next question we have to deal with is: Is global growth strong enough to deal with a Fed rate rise?”
In China, comments by Premier Li Keqiang that the country still has “sufficient capability to respond” if growth falls below a reasonable range failed to buttress markets as data showed producer prices fell by the most since 2009.
While economists predict the Fed will increase its key rate next week, futures traders price the odds of an increase at 28 percent, assuming the effective fed funds rate will average 0.375 percent after the first increase.
Equity futures extended declines after billionaire investor David Tepper said he’s not as bullish as he could be about stocks be because of potential problems with earnings growth. In an interview on CNBC, the president of Appaloosa Management LP said that taking a little cash off the table is “not a bad idea.”
The Stoxx Europe 600 Index slid 1.3 percent at 9:02 a.m. in New York and the MSCI Asia Pacific Index sank 1.5 percent.
EON SE was Europe’s biggest decliner, dropping 7.5 percent after canceling plans to spin off its German nuclear plants. Wm Morrison Supermarkets Plc retreated 3.4 percent after reporting first-half earnings that missed analysts’ estimates.
Futures on the S&P 500 dropped 0.5 percent. The benchmark gauge is moving more than 1.3 percent almost every day.
Jobless claims fell by 6,000 to 275,000 in the week ended Sept. 5, Labor Department data showed. For the last six months first-time claims have been below the 300,000 level that economists associate with a healthy labor market.
The MSCI Emerging Markets Index slid 0.8 percent and the real and Chilean peso led currencies lower. New Zealand’s dollar retreated after a rate cut and the yen fell on speculation the Bank of Japan will ramp up stimulus.
Hong Kong’s Hang Seng China Enterprises Index slipped 2 percent after a two-day, 9.6 percent surge that was the biggest since October 2011. The Shanghai Composite Index retreated 1.4 percent after back-to-back gains that had bolstered optimism the government will be able to engineer a soft landing for the nation’s markets and the wider economy.
After stocks closed the yuan jumped the most on record in Hong Kong’s freely-traded offshore market, spurring speculation China’s central bank intervened to deter bets against its currency.
Brazilian bonds fell and Petroleo Brasileiro SA’s American depositary receipts declined after S&P cut the sovereign one step to BB+, with a negative outlook. Yields on its bonds maturing in January 2025 climbed 28 basis points to 5.81 percent, the highest level since the notes were sold two years ago. ADRs of state-run Petrobras dropped as much as 8.1 percent.
The downgrade takes away the investment grade the country enjoyed for seven years, as President Dilma Rousseff struggles to shore up fiscal accounts amid a faltering economy.
(For more news on emerging markets, see TOP EM.)
New Zealand’s currency sank as much as 2.2 percent to 62.57 U.S. cents after the central bank trimmed the official cash rate for the third time in three months and signaled it may not be finished. The currency’s biggest drop came versus the Australian dollar, which rallied versus all its 16 major peers as employment rose.
Japan’s yen dropped after an aide to Prime Minister Shinzo Abe said October would be a “good opportunity” for the central bank to boost stimulus.
The yen weakened 0.2 percent to 120.73 per dollar as ruling Liberal Democratic Party lawmaker Kozo Yamamoto, who has advised Abe on economic policy, said the Bank of Japan should increase asset purchases.
The pound jumped 0.2 percent to $1.5395 after the Bank of England said the turmoil in global markets hasn’t shaken its view the time for a rate increase is approaching.
Treasuries were little changed, with the 10-year note yield at 2.20 percent. The U.S. will sell 30-year bonds on Thursday after Wednesday’s sale of benchmark 10-year notes drew the highest yield since June. German 10-year bund yields slipped one basis point to 0.69 percent and Britain’s 10-year gilt yield was at 1.85 percent.
Apple was marketing euro-denominated bonds of as long as 12 years, partly to fund share buybacks and dividends, according to a person familiar with the matter, who asked not to be identified as they aren’t authorized to discuss the matter publicly. It’s the iPhone-maker’s second sale in the single currency. Royal Dutch Shell Plc was also said to be selling bonds in euros.
The Bloomberg Commodity Index rose 0.3 percent after falling 1.3 percent on Wednesday to a two-week low.
Metals led gains, with copper climbing for a fourth day in the longest run in three months. Warehouse stockpiles tracked by the London Metal Exchange declined for all metals apart from zinc. Copper added 0.4 percent and nickel jumped 2.7 percent.
Base metals have rallied this week after Glencore Plc announced production cuts in Africa on Monday. That prompted banks including Australia & New Zealand Banking Group Ltd. and Citigroup Inc. to predict a shortage arriving earlier than previous forecasts.
West Texas Intermediate crude advanced 0.2 percent to $44.24 a barrel, after earlier sinking as much as 1.8 percent. Brent oil slipped 0.1 percent to $47.50. Analysts are predicting a 900,000-barrel increase in U.S. crude stockpiles in a report due from the Energy Information Administration Thursday.
–With assistance from Jonathan Burgos in Singapore, Emma O’Brien in Wellington, Paul Dobson, Neil Denslow, Trista Kelley and Eddie van der Walt in London and Camila Russo in Madrid.