Commodities fell to a nine-month low, led by the worst plunge in gold since 1980, and global stocks slid the most since June as China’s economic growth unexpectedly slowed and investors speculated hedges against inflation were unneeded. The yen and dollar climbed against most major peers and Treasuries rose.
The Standard & Poor’s GSCI gauge of 24 raw materials dropped 2.3%, its worst drop since November, as silver tumbled more than 11% during the day and gold futures plunged as much as 10%. Oil sank to less than $90 a barrel and copper declined to the lowest level since 2011. The MSCI All-Country World Index tumbled 1.8% and the S&P 500 Index sank 2.3% for its biggest decline since November. The Shanghai Composite Index capped a 10% retreat from this year’s peak and. Japan’s currency appreciated against all 16 major peers and the dollar gained versus 13.
While stocks extended losses as explosions rocked the finish line area of the Boston Marathon, almost all of the decline came before the incident. China’s economic growth lost momentum as factory output weakened last month, according to data from the National Bureau of Statistics in Beijing. Manufacturing in the New York region expanded less than projected in April, according to a report from the Federal Reserve Bank of New York.
“There’s a lot of talk about when the Fed might pull back and inflation worries, but underlying -- the way the market is behaving with commodities and gold -- it seems like people are acting differently,” Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said by telephone. The firm manages $3.9 billion. “They’re acting as if deflation is still potentially a fear.”
Gold tumbled more than 13% in two days amid speculation Cyprus will sell the metal to raise cash and the U.S. Fed will scale back on stimulus efforts, curbing the outlook for inflation.
The S&P GSCI fell to the lowest since July after gold for June delivery traded as low as $1,348.50 an ounce, the least since 2010. Oil in New York slipped 2.8% to $88.71 a barrel, the lowest level of the year, and copper declined 2.3% to $3.273 a pound, the least since October 2011.
Silver tumbled as much as 11.5%, extending its 6% drop on April 12.
The Chicago Board Options Exchange Gold ETF Volatility Index, which measures the cost of options on the SPDR Gold Trust exchange-traded fund, soared a record 62% to 34.48 for its biggest gain on record and its highest close since October 2011. The VIX, as the CBOE’s index of S&P 500 options is known, jumped 38% to 16.67 for its biggest advance since August 2011.
Gold futures may fall to $1,310 in June even as the worst of the selling is over, Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Inc., said in a telephone interview. Prices will drop as inflation worries ease and amid speculation the U.S. will end its third round of stimulus measures.
Hedge funds and other speculators added to bullish gold bets before the metal slumped into a bear market and Goldman Sachs Group Inc. warned the retreat is accelerating after the longest rally in nine decades.
The investors increased net-long positions by 19% to 56,084 futures and options in the week ended April 9, the first gain in three weeks, U.S. Commodity Futures Trading Commission data show. That contrasts with a 7.9% decline in bullish wagers across 18 U.S.-traded raw materials, which fell to a five-week low of 431,581 contracts. Holdings in agriculture dropped to the lowest since September 2006.
The turn in the gold cycle is quickening and investors should sell the metal, Goldman Sachs said in an April 10 recommendation that returned 5.4% in three days.
Ten-year U.S. Treasury yields decreased three basis points to 1.69%, the lowest level since Dec. 11. At least dozens of people were seriously injured in the marathon explosion, the Boston Globe reported on its Twitter feed.
The explosions “are giving Treasuries a boost and weighing on the stock market,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “Until we get news on exactly what this is you will see people jumping to buy safe assets on a quiet afternoon.”
Raw material producers lost 3.8% as a group and energy shares slid 3.3% to lead declines in all 10 of the 10 main industries in the MSCI World Index. Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. lost 8.3% and 6.7% to the lowest levels since 2010 and 2008, respectively.
The S&P 500 extended April 12’s 0.3% decline and Canada’s S&P/TSX Composite Index sank 2.7% to bring its two-day slump to 3.8%, its worst slide since October 2011. Commodity and energy producers make up 39% of the Canadian benchmark.
The Fed Bank of New York’s general economic index dropped to 3.1 this month from 9.2 in March. Readings exceeding zero signal expansion in New York, northern New Jersey and southern Connecticut. The median projection of 47 economists surveyed by Bloomberg was 7.
Sprint Nextel Corp. jumped 14%, the most since October, after Dish Network Corp. made an unsolicited $25.5 billion offer for the third-largest U.S. wireless carrier, topping a Softbank Corp. bid.
The Stoxx Europe 600 Index fell 0.7% as a gauge of basic-resources producers slid 4.8% to the lowest level since October 2011. Randgold Resources Ltd., a miner of the precious metal in West Africa, and Kazakhmys Plc, Kazakhstan’s biggest copper producer, lost more than 8% in London trading.
European Central Bank President Mario Draghi said monetary policy can’t address the root cause of the sovereign debt crisis and it’s up to governments to enact structural reforms.
“Problems in the euro-area economic landscape still loom large” and “the way out is to restore competitiveness,” Draghi said in a speech in Amsterdam today. “Undertaking structural reforms, budget consolidation and restoring bank balance-sheet health is neither the responsibility nor the mandate of monetary policy.”
The MSCI Emerging Markets Index fell for a second day, retreating 1.8% to the lowest level since November on a closing basis. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong slid 2%, the most in a week. China’s economy grew 7.7 in the first quarter from a year earlier, less than the 8% median of 41 estimates in a Bloomberg survey. Industrial production rose 8.9% in March, compared with a 10.1% forecast. Russia’s Micex Index sank 1.9% and Brazil’s Bovespa retreated 3.1% for its biggest drop since May.
India’s Sensex index gained 0.6% after a report showed lower-than-estimated inflation. Venezuela’s dollar bonds fell, sending the yield on notes due in 2027 up 33 basis points to 9.41%, as opposition parties challenged the election victory of ex-President Hugo Chavez’s handpicked successor, Nicolas Maduro.
The won strengthened against 15 of its 16 major peers, climbing 0.7% versus the dollar, after the U.S. agreed to work with China, Japan and South Korea to lure North Korea back into nuclear talks.
The yen and dollar rose the most against currencies of commodity-exporting nations, with the New Zealand and Australian dollars and South Africa’s rand weakening more than 3% versus their Japanese counterpart.
Japan will be reminded of its pledge not to drive down the yen when Group of 20 finance chiefs meet this week in Washington. The U.S. Treasury said it would pressure Japan to avoid “targeting its exchange rate for competitive purposes” in its semi-annual currency report to Congress released in Washington on April 12. Bank of Japan Governor Haruhiko Kuroda, who surprised markets April 4 by doubling monthly bond purchases in an effort to end deflation, said today there are signs Japan’s economy is picking up.