Global Stocks Head for Worst Month Since 2012 on China Woes
(Bloomberg) -- Global stocks added to losses that have them poised for the worst month in more than three years on fresh concern China’s efforts to prop up its markets will fail. U.S. equities pared losses after crude rebounded on a report indicating production was lower than previously estimated.
The Standard & Poor’s 500 Index almost erased a decline of more than 1 percent as oil surged 5 percent after the U.S. government reduced its crude production estimates. The equities gauge remains poised for the biggest monthly slide in more than three years, amid the rout in global risk assets sparked by China’s shock currency devaluation on Aug. 11. Chinese stocks capped their worst selloff since 2008, while investors sought the safety of the yen.
“The markets are still digesting the China news and it seems that the uncertainty from China’s rollercoaster is not over yet,” said Guillermo Hernandez Sampere, who helps manage the equivalent of $167 million as head of trading at MPPM EK in Eppstein, Germany. “Any panic created out of this high volatility keeps investors out of the market. There’s still no clear message” on when the Fed will raise rates, he said.
The S&P 500 dropped 0.4 percent at 11:53 a.m. in New York, headed for its worst monthly slide since May 2012. The MSCI All- Country World Index slid 0.5 percent, poised for a 6.8 percent decline in August, the biggest drop since May 2012. The yield on 10-year Treasury notes was little changed near 2.18 percent. U.S. crude jumped 5 percent, while the yen strengthened for the first time in five days
The rout in global equities this month has erased more than $5 trillion from the value of shares in August as Chinese policy makers are trying to bolster the market amid growing concern that its economy may be in worse shape than analysts had estimated.
Trading in U.S. equities has been volatile, with the S&P 500 last week alone plunging the most since 2011 to enter a correction, only to rally more than 6 percent over two days for its best back-to-back gains since the beginning of the bull market in 2009. The Chicago Board Options Exchange Volatility Index is up 135 percent in August, headed for a record monthly jump.
While Treasuries advanced Monday, the yield on two-year Treasury notes headed for a fifth month of gains as Fed Vice Chairman Stanley Fischer kept alive speculation that interest rates will increase next month. The last time they advanced for that long was in 2006, which was also the last time the Fed increased rates.
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