Oil Slide Weighs on Stocks; Pound Extends Decline: Markets Wrap

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Global stocks retreated and the yen strengthened after oil tumbled into a bear market on concern a supply glut will persist. The pound extended its decline as the U.K. prepared to start a new parliamentary session under Theresa May’s minority government.

European shares fell for a second day as crude continued to edge lower. Haven demand spurred the yen and gold, which was poised to advance after five days of losses. For once oil’s woes had little impact in Saudi Arabia, where a palace reshuffle and good news from MSCI Inc. boosted equities. Shanghai stocks also advanced after the index provider added China’s domestic shares to its emerging-markets gauge.

Read more: Liquor Titans to Coal Miners: the Chinese Stocks in MSCI’s Club

The weakness in crude and other commodities threatens to dent arguments from U.S. central bankers that weak inflation rates will be transitory, adding to concerns of a Fed policy error that could unintentionally crimp the global economic recovery.

Meanwhile, MSCI said it will add 222 China A-share stocks starting in May 2018. The index provider delayed its decision on the status of Argentina’s equities and said it will consult on the possible inclusion of Saudi Arabia in the index.

Here are some of the key events on the agenda:

  • Still to come on the Fed speaker list: Jerome Powell, James Bullard and Loretta Mester.
  • New Zealand’s central bank is expected to leave its benchmark interest rate at a record low when it meets on Thursday.

Read our Markets Live blog here.

And here are the main moves in markets:

Asia

  • Australia’s S&P/ASX 200 Index slumped 1.6 percent, erasing its gain for the year, as energy shares tumbled. BHP Billiton Ltd. and Rio Tinto Ltd. slid at least 2.9 percent.
  • The Shanghai Composite Index finished with a 0.5 percent gain, after swinging between gains and losses throughout the day following the MSCI decision. Hong Kong’s Hang Seng Index fell 0.6 percent.

Stocks

  • The Stoxx Europe 600 lost 0.7 percent as of 10:02 a.m. in London, with financial shares leading the way.
  • The MSCI Emerging Markets Index slid 0.6 percent.
  • Saudi Arabia’s Tadawul All-Share Index climbed 3.3 percent.
  • Contracts on the S&P 500 dropped 0.2 percent. The gauge’s retreat on Tuesday was led by energy stocks and consumer discretionary producers, which slumped 1.3 percent.

Commodities

  • West Texas oil fell 0.2 percent to $43.41. Futures tumbled more than 2 percent on Tuesday, touching the lowest since August.
  • Gold rose 0.2 percent to $1,245.98 an ounce after falling for five straight days.

Currencies

  • The British pound dropped 0.2 percent to $1.2607. The currency lost 0.9 percent on Tuesday after Bank of England Governor Mark Carney said he is still worried about the impact of Brexit on the economy.
  • The euro was little changed at $1.1136, after two days of declines.
  • The yen rose 0.2 percent to 111.18 per dollar, after gaining 0.1 percent on Tuesday.
  • The Bloomberg Dollar Spot Index was flat after rising 0.3 percent on Tuesday and 0.4 percent the previous day.

Bonds

  • The yield on 10-year Treasuries fell one basis point to 2.15 percent, after falling three basis points on Tuesday.
  • The yield on U.K. benchmark bonds fell two basis points.

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