U.S. stocks fell, reversing an earlier rally, as the International Monetary Fund said risks of turmoil in emerging markets and of deflation in the euro area are threatening the global economy. Ukraine’s bonds tumbled while U.S. natural gas jumped to a four-year high.
The S&P 500 fell 0.1 percent to 1,838.90 at 12:11 p.m. in New York, after the benchmark index climbed to within two points of an all-time closing high. The Stoxx Europe 600 Index gained 0.1 percent, erasing an earlier decline. The 10-year Treasury yield fell one basis points to 2.70 percent, while the rate on Ukraine’s June 2014 bond jumped 11 percentage points to a record 34.27 percent. Natural gas climbed above $6 for the first time in four years, coffee surged to a 15-month high while silver ended the longest rally since at least 1968.
In a note prepared for central bankers and finance ministers from the Group of 20, the IMF said the recovery is still weak and “significant downside risks remain.” The Fed releases minutes later today of its January meeting, at which policy makers pushed ahead with stimulus cuts. U.S. housing starts fell 16 percent in January, the Commerce Department said. Clashes between Ukraine police and anti-government activists killed at least 25 people and left hundreds injured in the bloodiest episode of the country’s three-month standoff. Violence in Bangkok killed five people.
A January global growth forecast of 3.7 percent for this year, from 3 percent in 2013, hinges on recent market volatility from Turkey to Brazil being short lived, the IMF staff wrote.
Political Tensions
Rising political tensions from Ukraine to Thailand, China’s slowdown and the Federal Reserve’s tapering of its stimulus have resulted in falling stocks and currencies in emerging markets. Less than two months into 2014, global investors pulled more money out of emerging-market stock and bond funds than the total amount they retracted last year.
Ukraine’s benchmark equity gauge slid 3.2 percent today, extending yesterday’s 4.2 percent decline. The hryvnia tumbled 1.2 percent to 8.95 per dollar.
President Viktor Yanukovych threatened to crack down on protesters after the bloodiest clashes in the country’s three- month standoff. Hundreds remained on Independence Square today after activists last night repelled a police attempt to clear their main protest camp in central Kiev.
EU foreign ministers will meet tomorrow to weigh “all possible options,” including “restrictive measures against those responsible for repression,” the bloc’s foreign policy chief, Catherine Ashton, said in an e-mailed statement.
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