World Stocks, Commodities Decline on China Growth Worries

Bikram Pandey
20 Jan, 2011
New York City

U.S. indexes fell on China worries and tech stocks led the market decline after cloud computing related companies fell. China

[R]4:00 PM New York – U.S. broader indexes fell on China worries and tech stocks led the market decline after cloud computing related companies fell. China’s fourth quarter growth accelerated and inflation worries prompted a weakness in commodities. Copper, silver and crude oil fell more than 2%. Gold edged 1.5% lower.[/R]

U.S. indexes traded lower as commodities prices declined, initial claims of unemployment declined to 404,000 at the end of last week and Morgan Stanley reported sharply higher earnings in contrast to a earnings fall at Goldman Sachs.

China’s economy expanded at 10.3% in 2010 despite an increase in lending restrictions but inflation edged lower. Investors in the U.S. and Europe are increasingly focused on China’s inflation and the pace of economic expansion and worried that the sustained rise in recent inflation may lower the growth in the longer term.

Economy expanded at 9.8% in the fourth quarter ending in December and accelerated from the 9.6% increase in the third quarter.

China in the recent years has been the engine of global economic growth and China transitions from the export led to the domestic consumption driven growth, inflation is increasing under scrutiny. China has increased rates two times in the last four months and increase bank reserve requirements seven times in the last one year with large banks required to keep as much as 20% in reserves.

China’s President Hu Jintao on the second day of his U.S. visit ordered 200 Boeing planes that have catalog prices of $19 billion and announced a total of $45 billion in deals.

K+S Canada acquired stake in Potash One. Boston Scientific agreed to buy Atritech.

The European indexes declined tracking lower commodities and a strong GDP expansion in China stoking worries that China may not be able to curb inflation. German producer price inflation rose and Italy’s industrial new orders declined. Iberdrola acquired Brazil-based Elektro for $2.4 billion.

The UK indexes declined the most in European trading after weak commodities prices. The UK manufacturing output estimated to improve and car production rose in 2010. Irish inflation soared in December. easyJet slumped 17% after first quarter revenue rose.

Japanese stocks indexes declined 1% to 45-day low. Commercial banks were the net buyers of long-term corporate and municipal bonds for the first time in two months. Financial Services Agency endorses a hike in compulsory auto liability insurance policy by 11%.

Shanghai Indexes drop more than 2.8% while the index in Hong Kong drops 1.7%. China’s GDP expands at a better-than-expected 10.3% in 2010. The external outstanding debt of mainland China reaches $546.4 billion at the end of September.

Stocks in Mumbai closed higher after fluctuating in negative territory. RBI relaxes debt restructuring norms for the micro finance sector. India and China top labor productivity table in 2010.

Stocks in Sydney fell more than 1% led by drops in resource stocks followed by financial and energy stocks. Oz Minerals gold and copper 2010 output exceeds targets. Exports of metallurgical coal from Gladstone Port will commence on Friday.

Commodities, Currencies and Yields

Dollar declined against euro to $1.346 and fell against the Japanese yen to 82.95. One UK pound fetched $1.588.

Crude oil decreased $2.00 to $88.86 a barrel for a front month contract, natural gas edged higher 0.12 cents to $4.64 per mBtu and gasoline decreased 6.2 cents to 241.94 cents.

Gold fell $20.70 in New York trading to at $1,349.50 per ounce, silver decreased $1.21 to $27.58 per ounce and copper for the front month delivery decreased 12.20 cents to $4.24 per pound.

Yield on 10-year U.S. bond increased to 3.44% and on 30-year U.S. bond yield rose to 4.59%.