New York/Chicago: Metals and energy sank, leading a gauge of commodities to an eight-month low and extending a slump that Citigroup Inc. said may mark the death bell for the four-year rally in raw materials. US benchmark stock indexes fell from records as retail sales and consumer confidence slid.
The S&P/GSCI Index tumbled 1.3% to the lowest level since July. Gold futures plunged as much as 4.7% to $1,491.40 an ounce, trading below $1,500 for the first time since 2011 and entering a bear market, amid speculation Cyprus will sell reserves to raise cash. The S&P 500 Index slipped 0.5% while emerging market technology stocks fell the most since August after Infosys Ltd.’s sales forecast missed estimates. The 10-year treasury note yield lost seven basis points to 1.72%, while the dollar strengthened versus 13 of 16 major peers.
US retail sales fell in March by the most in nine months, commerce department figures showed, and the Thomson Reuters/University of Michigan preliminary index of consumer sentiment sank to the lowest level since July. European stocks and the euro fell earlier as the currency bloc’s finance ministers prepared to meet. Citigroup analysts said there will be many more losers than winners for commodities this quarter and most industrial and precious metals will decline.
It’s partly driven by a number of investors who have come to he conclusion that it’s not attractive to be in commodities, especially with what’s going on in the stock market, said Jesper Dannesboe, senior commodity strategist at Societe Generale SA in London. When people see gold going down, that might have reinforced selling in other commodities. We think it’s overdone in base metals, in oil, because the global economy is recovering. In gold, this is the beginning of the bear market.
Fourteen of the 24 commodities tracked by the S&P GSCI Index retreated as the gauge extended its retreat since 14 February to 8.3%. Gold is down 21% from a record settlement of $1,891.90 in August 2011, meeting the common definition of a bear market.
In India, gold prices crashed to hit a 11-month low and closed below the Rs.29,000 per 10gm mark at the domestic bullion hub in Mumbai on Friday on emergence of hectic off-loading by stockists and speculators.
West Texas Intermediate oil for May delivery fell 2.5% to $91.19 a barrel and Brent crude for May settlement slid 1.3% to $102.96 a barrel on the London-based ICE Futures Europe exchange. The International Energy Agency on Thursday reduced its estimates for global oil demand.
European Central Bank (ECB) president Mario Draghi said the profits of any gold sales by the Cypriot central bank must be used to cover losses it may sustain from emergency loans to Cypriot commercial banks. European creditors on Friday left a possible gold sale in the hands of the Cypriot central bank, which manages 13.9 metric tonnes of the metal, according to the World Gold Council.
The head of Cyprus’s central bank said the government is attacking his institution’s independence and doesn’t have the right to sell the nation’s gold reserves without the central bank’s consent. The central bank is at loggerheads with the government of President Nicos Anastasiades as Cyprus finalizes a €17-billion ($22 billion) bailout agreement that will shrink its banking sector and tax deposits of more than €100,000.
The independence of the central bank of Cyprus is being attacked at this time, Panicos Demetriades, who is also a member of the ECB’s governing council, said in an interview in Dublin on Friday. The government seems to have committed to a sale of state gold without consulting the central bank, Demetriades said.
Holdings in the SPDR Gold Trust, the top exchange-traded fund backed by bullion, reached 1,181.4 metric tonnes on Thursday, the lowest in almost three years. Through Thursday , prices slumped 6.6% in 2013 as global economies improved.
Minutes of the Federal Reserve’s March meeting released on 10 April showed several members were in favour of pulling back on its $85 billion monthly debt-buying program this year. The metal climbed for 12 straight years through 2012 partly as central banks expanded their balance sheets.
The Fed’s unprecedented bond purchases and three straight years of profit growth helped send the S&P 500 up almost 136% from its bear-market low in 2009. The benchmark index closed on Thursday at a record 1,593.37. Short covering and new investments by money managers also helped keep US stocks at record highs. A basket of S&P 500 stocks with the most bearish bets rose 4.7% this week, according to Goldman Sachs Group Inc. data.
Analysts forecast S&P 500 earnings fell last quarter for the first time since 2009, projecting a 1.4% decrease from the first quarter of 2012, according to data compiled by Bloomberg. Profit growth is projected to return later in the year, with full-year earnings forecast to increase 7.3%, the data show.
The 0.4% decrease in retail sales, the biggest since June, followed a 1% gain in February, according to the commerce department. The median forecast of 85 economists surveyed by Bloomberg called for an unchanged reading in March. Department stores and electronics dealers were among the weakest showings. The Reuters/Michigan consumer-confidence index fell to 72.3 in April, below all 69 estimates in a Bloomberg survey of economists.
The first quarter really ended up on a weak note, David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages $120 billion. We’re concerned that with the economy ending on a weak note, the commentary from companies as they report might be a bit negative compared with what people are expecting and that could put pressure on the market.
Gauges of commodity and energy producers in the S&P 500 lost at least 1.4% on Friday for the biggest declines among 10 industries. DuPont Co., Alcoa Inc. and Caterpillar Inc. led declines in the Dow Jones Industrial Average.
Banks slipped 1.4% as a group. Wells Fargo & Co. slid 1.1% after results showed revenue dropped and lending margins narrowed, overshadowing record first-quarter profit that was helped by cost cuts. JPMorgan Chase & Co. slipped 0.3% after reporting record profit that beat estimates on cost cuts and an improvement in consumer credit quality that let the bank reduce loan-loss reserves.
Harris Corp. slid 5.4% after forecasting revenue that missed analysts’ estimates. J.B. Hunt Transport Services Inc. lost 3% after posting first-quarter earnings that missed projections.
The Stoxx Europe 600 Index fell 0.9% as automakers, commodity producers and banks led declines. The gauge capped a 1.8% gain this week, its best in a month.
Cap Gemini, Atos and Software AG lost more than 2.5% today on Infosys’s sales forecast. Telecom Italia SpA advanced 3.8% after saying Hutchison Whampoa Ltd. would want control of the combined entity formed in a possible merger.
The yen strengthened at least 0.4% against all of its 16 major peers, climbing the most against the South African rand and Australian, Mexican and New Zealand currencies. It appreciated 0.8% to 98.87 per dollar after four-year low this week.
Bank of Japan (BoJ) chief Haruhiko Kuroda this week reiterated a pledge to do what’s needed to meet an inflation target of 2% in two years. The BoJ said last week it will buy ¥7.5 trillion ($75 billion) of bonds a month and double its monetary base in two years, driving the 10-year yields in Asia’s second-biggest economy to as little as 0.33%.
Japanese investors bought a net ¥645 billion ($6.5 billion) of foreign securities in the week ended 23 March, according to Japan’s ministry of finance. That’s the highest level since the data began in 2005. Purchases reached 1.61 trillion in March, also a record, the data show.
The MSCI Emerging Markets Index fell for the first time in four days, losing 1%. Infosys, India’s second-largest software exporter, plunged 21%, the most in 10 years, and India’s Sensex index sank 1.6%, the most in a week. Brazil’s Bovespa sank 1.3%, extending its two-day slump to almost 3%.
The Shanghai Composite Index lost 0.6% before a report on China’s first-quarter economic growth on 15 April. Russia’s Micex Index sank 1.1%.
South Korea’s Kospi index slid 1.3% and the won snapped a three-day rally. The US Defence Intelligence Agency (DIA) has reported that North Korea now has some nuclear weapons small enough to be delivered by its ballistic missiles. The DIA cautioned in a classified report last month that it has only moderate confidence in that finding, which also said the reliability of North Korea’s missiles will be low. Bloomberg
Adam Haigh, Claudia Carpenter, Paul Dobson, Abigail Moses, Andrew Rummer, Stephen Voss, Stephen Kirkland and Alexis Xydias in London, Candice Zachariahs in Sydney, Kevin Buckland and Jae Hur in Tokyo, Tom Stoukas in Athens, Joe Richter and Millie Munshi in New York and Jeff Black in Frankfurt contributed to this story.