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GLOBAL MARKETS-Stocks fall on China concern, supply drags on oil
March 4, 2013 / 6:37 PM / in 5 years

GLOBAL MARKETS-Stocks fall on China concern, supply drags on oil

* World share indexes slip as growth worries weigh

* U.S. crude dips below $90 for first time this year

* Euro dips as talk of ECB rate cut gains strength

By Rodrigo Campos

NEW YORK, March 4 (Reuters) - Shares in major world markets slipped on Monday as China’s plans for tighter controls on its property sector added to concern about slower global growth, while indicators that oil markets are amply supplied weighed on crude prices.

The euro dipped after last week’s weak euro zone manufacturing data increased expectations the European Central Bank could cut interest rates to boost the region’s economy.

On Sunday, China reported that its services sector expanded at the slowest pace in five months in February, and factory growth also cooled to multi-month lows. The government could increase down-payments and loan rates for buyers of second homes in cities where prices are rising too quickly.

Growth concerns prompted some profit taking on Wall Street and major indexes dipped, though they were still near historic or multi-year highs.

“There’s still a lot of uncertainty, but it doesn’t seem like the weakness has any follow-through because there’s a lot of people that have underperformed or are underinvested and jump in on any kind of weakness,” said Alan Lancz, president, Alan B. Lancz & Associates Inc in Toledo, Ohio.

The Dow Jones industrial average fell 17.23 points or 0.12 percent, to 14,072.43, the S&P 500 lost 0.64 point or 0.04 percent, to 1,517.56 and the Nasdaq Composite dropped 1.61 points or 0.05 percent, to 3,168.13.

MSCI’s world equity index fell 0.2 percent. European shares closed down 0.02 percent at 1,168.36 after a 2.1 percent fall in mining stocks.

A lack of progress in talks to form a new Italian government after last week’s inconclusive elections weighed most on the country’s stocks, down 0.85 percent, while 10-year bond yields rose to 4.881 percent after hitting more than 5 percent earlier in the session.

Analysts said yields could have climbed higher but for the ECB’s promise to support struggling nations but there remained doubts over how this could be implemented without a government able to enact tough reforms.

Rising expectations that euro zone economic worries could prompt the ECB to cut interest rates sooner than previously anticipated weighed on the euro.

The euro zone common currency was down 0.1 percent at around $1.3006, just above Friday’s 11-week low of $1.2966.

“There’s growing speculation that the (ECB) will show a greater willingness to push the benchmark interest rate to a fresh record low,” said David Song, currency analyst at DailyFX in New York.

“The fundamental developments coming out of the euro area may continue to drag on the exchange rate should it highlight a weakening outlook for growth and inflation,” Song added.

Despite the apparent run from risk on the day, U.S. Treasury debt prices edged lower as investors weighed recent price gains against the Italian uncertainty and Chinese growth concerns.

Treasuries could likely stay range-bound for much of the week as markets await an ECB policy meeting on Thursday and key U.S. jobs data on Friday.

“The market’s a bit expensive to really go ‘gung-ho’ and buy at this point even though there’s a lot of risk,” said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.

The 10-year U.S. Treasury note fell 8/32 in price to yield 1.8703 percent, after hitting a fresh six-week low of 1.827.


Concern about China’s growth, alongside expectations of even slower growth in the United States, weighed on crude oil prices.

“Economic sentiment has shifted, and we’re also seeing the first stages of long liquidation in the oil market. Money managers had increased their exposure (to oil) a lot over a 10-week period,” said energy analyst Tim Evans at Citi Futures in New York.

The International Monetary Fund said U.S. spending cuts that were triggered last Friday could cost the world’s biggest oil consumer about 0.5 percent of its economic growth, a factor that could weigh on global oil demand.

Total U.S. oil inventories are up 9 percent from year-ago levels and domestic oil and liquids production has risen by around one-fifth due largely to a boom in shale drilling, Evans added, citing the most recent data from the U.S. Energy Information Administration.

U.S. crude traded below $90 a barrel for the first time this year, triggering more selling, according to analysts.

Brent was last down 0.6 percent at $109.70 a barrel while U.S. crude fell 1.3 percent to $89.49.

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