In the countdown to the Federal Reserve decision next week, markets are looking gloomy. Shares in developing nations are heading for the longest slump since June, European stocks are at a two-month low and oil is headed for its worst week since March.
Emerging-market equities fell for an eighth day amid speculation higher U.S. rates will trigger outflows from riskier assets. South Africa’s rand was poised for its biggest weekly slump since the global financial crisis erupted in 2008 and China’s yuan was on course for the steepest weekly drop since its August devaluation. While oil declined for a sixth day in New York, industrial metals rose amid plans to cut back output.
“The looming U.S. interest-rate increase is creating ripples in the market while China’s economic outlook is raising the risk of a global slowdown,” Jonathan Ravelas, chief market strategist at BDO Unibank Inc., the largest Philippine lender by assets, said in Manila.
Emerging-market equities are headed for a third weekly decline amid a slump in commodity prices to a 16-year low, concern that China’s slowdown will spread and the potential increase in U.S. borrowing costs. Traders are pricing in a 76 percent chance that the Fed will raise rates at its Dec. 16 meeting, with economist surveys indicating that data out of the U.S. Friday will show stronger growth in retail sales and producer prices for November. China is due to post data on retail sales, industrial production and financing on Saturday.
Oil has lost more than 8% this week, sparking the steepest slump since August in Asian energy producer stocks.
Emerging Markets
The MSCI Emerging Markets Index dropped 1.4 percent, heading for the lowest close since September, as of 10:20 a.m. in London. The gauge dropped 3.7 percent in the week, the biggest decline for the period since September. Equity benchmarks in Hong Kong, Indonesia, Turkey and South Africa lost at least 1.4 percent on Friday.
The Hang Seng China Enterprises Index sank 1.5 percent, its seventh day of losses and the Shanghai Composite Index slid 0.6 percent to a five-week low. Fosun International Ltd. bonds plunged after Caixin magazine reported that billionaire Chairman Guo Guangchang was unreachable. Its share trading was halted.
More than 30 senior executives of listed Chinese companies have gone missing or faced government probes this year, according to the state-run Securities Times.
The rand weakened for a seventh day in the longest slump since 2013, losing 1.3 percent. The currency has tumbled 8.3 percent this week, the most since the period ended Oct. 24, 2008, after President Jacob Zuma abruptly fired his finance minister, strengthening his grip on power amid differences over government spending.
The yuan fell 0.22 percent in Shanghai, taking its five-day loss to 0.78 percent, on speculation China’s central bank is taking advantage of a stronger dollar to weaken the currency before the U.S. raises interest rates. The People’s Bank of China cut the yuan’s daily reference rate by 0.8 percent this week, the most since it devalued the currency in August and made the fixing mechanism more market-oriented.
Malaysia’s ringgit was poised to halt a three-week advance as a drop in crude prices to under $40 a barrel compounded the pressure on Asia’s only major net oil exporter and clouded the outlook for government finances.
Stocks
The Stoxx Europe 600 Index slid 0.4 percent. The benchmark measure has lost 6.2 in December amid a rout in commodity companies and disappointment over the European Central Bank’s last meeting. It advanced in the final month of five of the past six years.
Eurofins Scientific SE tumbled 7.4 percent after canceling a share sale, citing poor market conditions. Suez Environnement Co. rose 2.1 percent after Les Echos reported that Engie, its biggest shareholder, is considering taking control of the company.
U.S. stock-index futures were little changed, with contracts on the Standard & Poor’s 500 Index rising less than 0.1 percent, after the index halted a three-day slide on Thursday.
Commodities
Oil headed for the biggest weekly decline since March amid speculation OPEC’s decision to effectively scrap production targets will keep the market oversupplied. The global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, the International Energy Agency said in a report released Friday. West Texas Intermediate crude dropped 1 percent to $36.38 a barrel.
Most industrial metals gained, with copper rallying the most two weeks, amid speculation that China’s state stockpiling agency planned to buy material, which would help soak up surplus supplies. Aluminum climbed for a third day after China’s smelters agreed not to expand capacity.
Copper had the most negative outlook in a Bloomberg commodities outlook survey, with 18 respondents saying they were bearish for 2016, while eight were bullish and four were neutral.
Currencies
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose 0.1 percent for its fourth daily increase this week and is up 0.3 percent since Dec. 4.
The dollar advanced for a second day against the yen. Australia’s dollar weakened 0.3 percent after jumping 0.7 percent last session on an unexpected increase in employment. The euro was at $1.0953.
Bonds
From the U.S. to Greece to Japan, all major developed government bond markets are poised to finish 2015 with a gain even as the Fed prepares to raise interest rates.
All 26 markets tracked by Bloomberg are poised to generate positive returns this year. Greek bonds led the gains with an 18 percent rally after the nation received an international bailout. Treasuries advanced 1 percent. Government securities also rose in Japan, Germany and Switzerland, pushing yields on some maturities in those nations below zero.
U.S. 10-year yields were little changed at 2.22 percent on Friday, compared with 2.17 percent on Dec. 31, 2014. The yield on similar-maturity German bunds was at 0.56 percent.
Patrick Abboud
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