New York - The weakest Chinese manufacturing data since the global financial crisis accelerated a selloff in riskier assets, sending emerging-market stocks to the worst week in two years. Investors sought safety in the yen.
European shares headed for a correction, equities in Hong Kong, Indonesia and Taiwan entered bear markets and futures signaled US stocks extend losses after falling the most in 18 months. Oil was set for its longest weekly losing streak since 1986 and copper extended a rout that has sent it the lowest price in more than six years. China’s factory data followed speculation of a deepening slowdown triggered by last week’s devaluation of the yuan.
“This week’s selloff started from yuan devaluation, which generated speculation about the true state of China’s economy,” Hertta Alava, who helps oversee the equivalent of $395 million as the head of emerging markets at FIM Asset Management in Helsinki, said by e-mail. “China’s PMI was weak, so it is just adding fuel to this negativity.”
The MSCI Emerging Markets Index slid 1.7 percent at 6:55 a.m. in New York, with the Malaysian ringgit and South Korean won leading currencies lower. The Stoxx Europe 600 Index lost 1.3 percent, briefly paring earlier declines after manufacturing in the euro area expanded more than forecast. Copper slid 1.6 percent while the yen strengthened for a third day against the dollar.
More than $3.3 trillion has been erased from the value of global equities after China’s decision to devalue its currency last week spurred a wave of selling across emerging markets. The rout spread to U.S. shares on Thursday, sending stocks down the most in 18 months. Standard & Poor’s 500 Index futures slipped 0.3 percent after the gauge closed below its 200-day moving average for the first time since July 9.
Chinese markets
Hong Kong’s Hang Seng Index dropped 1.3 percent, taking declines since an April high beyond 20 percent. Taiwan’s benchmark gauge dropped 3 percent to finish in a bear market and the Jakarta Composite Index slid 2.4 percent.
The Shanghai Composite Index slumped 4.3 percent, taking the week’s loss beyond 10 percent and coming within one point of erasing all gains since the government began efforts to prop up the market in July. Japan’s Topix index slid the most since July 8 and the Kospi gauge in Seoul had its worst week since May 2012.
The preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics was at 47.1 for August. That compared with a median estimate of 48.2 and the final reading of 47.8 the previous month. Numbers below 50 indicate contraction.
A measure of 20 developing economy currencies is set to extend its longest streak of weekly losses since 2000 after Vietnam and Kazakhstan devalued. The Korean won weakened 0.8 percent Friday, its fifth drop in six days, while Malaysia’s ringgit sank 1.1 percent to a new 17-year low.
Soaring volatility
“The whole world’s looking a little bit sad,” said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion. “China still looks really worrying on a number of fronts.”
The selloff engulfed all western European markets and industries in the Stoxx 600. The gauge is heading for its worst weekly loss of the year, down 4.3 percent, while the S&P 500 has dropped 2.7 percent. The VIX gauge of US stock volatility jumped the most since June on Thursday, set for a 49 percent weekly surge.
While concern grew about the global recovery, data today showed the euro-area economy picked up momentum this month, with an improvement in Germany lifting a business index. A report later today may show manufacturing in the US remained stable.
Oil headed for the longest run of weekly declines in almost three decades on signs the supply glut that drove prices to a six-year low will be prolonged. The US pumped crude in July at the fastest pace for the month since at least 1920, the American Petroleum Institute reported Thursday.
West Texas Intermediate for October delivery lost 0.8 percent to $41 a barrel. Prices have decreased 3.5 percent this week, an eighth weekly loss. Brent declined 0.8 percent to $46.23 a barrel.
Metals slump
Copper is poised to extend its longest run of weekly declines since January, with aluminum, lead, nickel and zinc also dropping.
The cost of insuring investment-grade corporate debt was at the highest since July 9. The Markit iTraxx Europe Index of credit-default swaps held at 71 basis points. The Markit iTraxx Europe Crossover Index, covering CDS for junk-rated companies, rose three basis points to 334 basis points.
US Treasuries pared their biggest weekly advance in two months, with 10-year yields climbing one basis point to 2.09 percent. The yield has fallen 12 basis points since Aug. 14.
Greek 10-year bonds declined for a fourth day after Prime Minister Alexis Tsipras announced Thursday he would step down, paving the way for snap elections. The yield on 10-year notes increased 53 basis points to 10.08 percent, while those on two- year notes rose 180 basis points to 14.59 percent.
BLOOMBERG