Stocks drop with US futures as G-20 underwhelms; Yen rises

Bloomberg

Asian and European stocks fell with U.S. equity futures after Group of 20 finance chiefs made only vague commitments to spur growth at a Shanghai meeting. Japan’s yen rose with gold as haven assets were favoured.
The MSCI Asia Pacific Index slipped to a one-week low and the Stoxx Europe 600 Index declined for the first time in three days. The Shanghai Composite Index dropped to a one-month low. The yen added to its biggest monthly gain since 2008, while China’s yuan fell for a seventh day. New Zealand’s dollar weakened as poor economic data boosted the case for an interest-rate cut. Crude oil retreated for a second day and copper led declines among industrial metals.
Steep losses on global stock markets and volatility in currencies this year had fueled calls for G-20 members to do more to stoke demand and bolster stability. While finance ministers from the world’s biggest economies didn’t come up with coordinated stimulus, they did agree to use monetary, fiscal and structural tools to support growth. They also reiterated pledges to refrain from competitive devaluations, with Eurogroup chief Jeroen Dijsselbloem noting that there was some concern surrounding Japanese policies.
The G-20 was “underwhelming,” said Ray Attrill, National Australia Bank Ltd’s global co-head of foreign-exchange strategy in Sydney. There was an “admission of downside growth risks but no tangible commitments to fiscal policy action in particular to bolster growth in the short term,” he said.
Central banks proved critical in avoiding a global depression last decade, though there is now no consensus among officials from the world’s top economies for an increase in stimulus. The International Monetary Fund last month trimmed its global growth projections and said 2016 would be a “year of great challenges.”

Stocks
The Stoxx Europe 600 fell 1 percent as of 8:06 a.m. London time, while the MSCI Asia Pacific Index lost 0.4 percent. Standard & Poor’s 500 Index futures slid 0.7 percent.
Japan’s Topix index dropped 1 percent, after gaining as much as 1.7 percent. Nissan Motor Co. jumped as much as 12 percent, the biggest intra-day gain since 2009, on plans for a record share buyback. The Shanghai Composite slumped 2.9 percent and Hong Kong’s Hang Seng Index declined 1.3 percent.
“There is little coming out of the G-20 to suggest major improvements in the policy mix of the most systemically important countries,” Mohamed El-Erian, chief economic adviser at Allianz SE, wrote in a Bloomberg View column published Monday. “With little hope for major policy changes, global economic growth will continue to struggle, the trifecta of national inequality (of income, wealth and opportunity) will worsen, and financial volatility will increase.”

Currencies
The yen strengthened for the first time in four days, rising 1 percent to 112.92 per dollar. It’s risen 7.3 percent in February, more than double the gain of any other major currency.
Eurogroup chief Jeroen Dijsselbloem said in Shanghai on Saturday that “there was some concern that we would get into a situation of competitive devaluations” with regards to Japan. Japanese Prime Minister Shinzo Abe told parliament Monday he is not trying to influence foreign-exchange rates, and that an excessively strong yen has been corrected under his economic reform program, dubbed Abenomics. The currency was trading around 85 per dollar when Abe took office in December 2012.
China’s yuan declined 0.08 percent, retreating for a seventh day as China’s central bank lowered the currency’s reference rate after upbeat U.S. economic data gave a lift to the dollar. The Bloomberg Dollar Spot Index fell 0.2 percent, following a 0.7 percent gain on Friday that marked its best performance of the year.
The kiwi weakened 0.5 percent, extending Friday’s 1.4 percent slump. A gauge of business confidence fell and home-building approvals declined, reports showed Monday. ANZ Bank New Zealand Ltd. said Monday it now predicts the Reserve Bank of New Zealand will reduce its benchmark interest rate twice this year, having previously forecast no change.

Commodities
Crude oil declined 0.3 percent to $32.68 a barrel, set for a fourth monthly decline. Prices are sliding on speculation a worldwide surplus will be prolonged amid increased exports from Iran and U.S. stockpiles that are at the highest in more than eight decades.
Copper prices fell 1.2 percent in London and nickel lost 0.6 percent. A London Metal Exchange gauge that tracks industrial metals was headed for a 3.4 percent gain in February, after sliding in all but one of the previous nine months.

Bonds
India’s bonds rallied after the government pledged to stick with its budget-deficit target in the fiscal year starting April. The 10-year yield dropped 12 basis points to 7.66 percent, the lowest level since November. The rate on similar-maturity U.S. Treasuries retreated one basis point to 1.75 percent, extending this month’s decline to 17 basis points.