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Business News/ Market / Stock-market-news/  Oil, European stocks decline while US shares retreat from record
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Oil, European stocks decline while US shares retreat from record

The S&P 500 Index dropped 0.2%, after the gauge closed at a record last week

The MSCI Emerging Markets Index declined 0.1%. Photo: AFPPremium
The MSCI Emerging Markets Index declined 0.1%. Photo: AFP

London/New York: Oil slumped with European stocks as Iraq fighting intensified and data showed weakness in euro-area manufacturing and services. The US stocks declined after reaching all-time highs last week, while copper rallied.

West Texas Intermediate crude slipped 0.7% at 11:43 am in New York. The Stoxx Europe 600 Index fell 0.5%. The Standard & Poor’s 500 Index dropped 0.2%, after the gauge closed at a record last week. The Russell 2000 Index of smaller companies lost 0.3%. The yield on 10-year treasuries slid less than 1 basis points to 2.60%. Copper advanced 1% and zinc increased 0.8%. The Australian dollar strengthened against 14 of its 16 major peers. Dubai stocks entered a bear market.

Euro-area manufacturing and services activity retreated this month, while Chinese manufacturing rose to a seven-month high in June. Iraqi forces regained control of border crossings into Syria and Jordan, state-sponsored Iraqiya television reported, citing the defence ministry. Purchases of previously owned US homes rose more than projected in May, a sign the industry is stabilizing after a weather-depressed quarter.

“You’re sitting up at all-time highs and you do have a geopolitical situation remaining out there that’s weighing on the market," Bill Stone, chief investment strategist at PNC Wealth Management, said in a phone interview. He helps oversee $131 billion in assets under management. “If you have to find something that’s a drag right now it’s the European PMIs that failed to provide a lift to the market. Europe’s out of the worst of it but it’s unclear if the economy is still stagnant."

The S&P 500 rose 1.4% last week, the most in two months, closing at an all-time high of 1,962.87. It is heading toward an increase of 4.8% for the quarter. The Dow average also ended the week at a record. Federal Reserve chair Janet Yellen said accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth.

Inflation Concern

Yellen emphasized the need to put more Americans back to work and downplayed concerns about asset-price bubbles and incipient inflation.

Integrys Energy Group Inc. jumped 13% after Wisconsin Energy Corp. agreed to pay $5.7 billion for the company. Micros Systems rose 3.3% as Oracle Corp. offered to buy it for a $68 a share. General Electric Co. fell 1.4% after clinching the $17 billion purchase of Alstom SA’s energy assets, its biggest acquisition ever.

Sales of previously owned US homes climbed 4.9% to a 4.89 million annualized rate, the most since October, after a 4.66 million pace in April, figures from the National Association of Realtors showed on Monday in Washington. The median forecast of 70 economists in a Bloomberg survey called for a rise to 4.74 million. Prices increased at the slowest pace in more than two years.

Homebuilders Climb

An S&P gauge of homebuilders added 1.1%, as each of its 11 members rose. PulteGroup Inc. climbed 1.5% and Lennar Corp. advanced 1%. Home Depot Inc. added 0.5%.

Fifteen of the 19 industry groups in the Stoxx 600 fell, with trading volumes 18% less than the 30-day average, data compiled by Bloomberg show. The gauge gained 0.3% last week, closing 0.5% short of a six-year high.

The euro-area PMI composite gauge slipped to 52.8 in June, less than the 53.4 reading from the median of 25 estimates in a Bloomberg survey of economists, amid a further slowdown in France’s economy.

European Economy

The euro area is struggling to sustain a recovery that received a bleak assessment from the International Monetary Fund (IMF) on 20 June. Earlier this month, the European Central Bank (ECB) introduced a negative deposit rate, announced targeted loans to stimulate lending and held out the prospect of asset purchases to stoke growth and inflation in the region.

Brent crude futures fell from the highest level in almost nine months on the report that Iraqi forces regained control of border crossings.

Government forces took back the Al Waleed border crossing into Syria and the Traibil passageway near Jordan, state-sponsored Iraqiya television reported, citing the defence ministry. Fighters from the Islamic State in Iraq and the Levant were earlier reported to have seized the borders. The Iraqi fighting hasn’t spread to the south, home to more than three-quarters of Iraq’s output.

‘Existential Threat’

In Baghdad, US secretary of state John Kerry met with Prime Minister Nouri al-Maliki, as well as ministers and party leaders. He told reporters after the talks that Iraq faces an existential threat, and said the US support will be intense, sustained, and if Iraq’s leaders take the necessary steps to bring the country together, it will be effective.

West Texas Intermediate oil slid 0.7%.

“At these levels we really need to see further disruption to get another rally," said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The militants have not gotten anywhere near the oil-producing regions."

The S&P GSCI gauge of commodities climbed as much as 0.6% to the highest level since 28 August, before erasing gains to drop 0.6% as oil slid. Copper rose a seventh day to $3.1420 for the longest streak of increases since December. Zinc rallied 0.8% to $2,183 a ton, the highest since February 2013.

A preliminary Purchasing Managers’ Index for China, the biggest consumer of industrial metals, rose to 50.8, exceeding the 49.7 median estimate of analysts in a Bloomberg survey, according to a report by Markit and HSBC Holdings Plc. It’s the first time over 50, indicating expansion, since December.

Aussie Advances

Australia’s dollar climbed 0.2% to 94.10 US cents after rising to 94.45, the strongest since 10 April. New Zealand’s currency advanced 0.1% to 87.03 US cents after reaching 87.49, the highest since 6 May. China is Australia and New Zealand’s biggest trading partner.

The euro weakened against all but two of its 16 major counterparts, slipping 0.2% versus the yen.

The MSCI Emerging Markets Index declined 0.1%. India’s Sensex dropped 0.3%. Dubai’s benchmark gauge retreated 4.3% by the close, extending declines from a peak in May to more than 20%, the threshold for a bear market.

The ruble gained 0.8% versus the dollar while Russia’s Micex index was little changed. Russian President Vladimir Putin voiced support on 21 June for a cease-fire in Ukraine declared by the former Soviet republic’s new president, Petro Poroshenko.

The rate on 10-year treasury notes fell less than 1 basis point to 2.60%. Yields were at almost the highest compared with equivalent German bonds in 15 years as the US prepares to sell $107 billion of coupon-bearing debt this week. Bloomberg

Emma O’Brien in Wellington, Fion Li in Hong Kong, Paul Dobson, Claudia Carpenter and Cecile Vannucci in London, Jonathan Burgos in Singapore, Corinne Gretler in Zurich, Yoshiaki Nohara in Tokyo and Moming Zhou in New York also contributed to this story.

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Published: 23 Jun 2014, 08:10 PM IST
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