Stocks retreated with metals after a bigger-than-estimated drop in China's imports underscored how weakness in the world's second-largest economy is being transmitted to its trading partners. Anheuser-Busch InBev SA advanced after announcing an agreement to buy SABMiller Plc.
Energy and material companies led losses on the MSCI Emerging Markets Index as shipments to China plunged 20 per cent in dollar terms in September. Chinese shares declined in Hong Kong and a gauge of global equities dropped after rising every day this month. European stocks fell with US index futures. The Australian dollar fell after a nine-day rally as nickel and gold slid.
Treasuries rallied with the euro and yen. "China's weakening economy will continue to weigh on the market," Tim Schroeders, a portfolio manager who helps oversee about $1 billion in equities at Pengana Capital Ltd. in Melbourne, said by phone. "We've had a fairly significant lift in equities on speculation the Fed will delay raising rates. That's now well priced into valuations."
Plunging imports fueled concern that China's transformation into a consumption-led economy is facing considerable headwinds, overshadowing a smaller-than-expected drop in exports and the second-highest trade surplus on record. Data confirming slack demand from the world's biggest consumer of commodities adds to a host of poor economic reports that have underscored the challenges faced by global policy makers as they attempt to stave off the threat of deflation.
Stocks
The MSCI Emerging Markets Index dropped 0.9 per cent by 8:18 a.m. in London as the Stoxx Europe 600 Index retreated 0.6 per cent. Futures on the Standard & Poor's 500 Index slid 0.3 per cent and the MSCI All Country World Index declined 0.3 per cent.
SABMiller surged 9.3 per cent in London, while AB InBev rallied 3.6 per cent. InBev agreed to buy SABMiller for almost 69 billion pounds ($106 billion), boosting its bid to clinch a record industry deal that brings one out of every three beers sold worldwide under a single company.
Hong Kong's Hang Seng Index retreated 0.8 per cent and the Hang Seng China Enterprises Index slid 1.3 per cent. The Shanghai Composite Index rose 0.2 per cent to extend a three-day, 7.7 per cent surge amid speculation the People's Bank of China will introduce more measures to boost growth and stabilize markets.
The central bank has cut lenders' reserve requirement ratios three times this year and lowered its benchmark interest rate five times since November as the economy heads for its weakest annual growth in more than 20 years. Exports dropped 3.7 per cent last month, compared with estimates for a 6 per cent retreat.
Indonesia's Jakarta Composite Index fell 2.6 per cent, heading for the steepest retreat in a month, as banking shares fell after regulators published a draft plan to impose capital surcharges on major lenders.
The S&P 500 rose 0.1 per cent Monday for a fourth straight gain. Trading volumes were 23 per cent below the 30-day average amid the Columbus Day holiday.
Currencies
A gauge of 20 emerging-market currencies slid 0.3 per cent Tuesday, falling for a seconds day as China's yuan slipped 0.3 per cent in offshore trading. The ringgit sank 1.1 per cent in a second day of declines, while Indonesia's rupiah, last week's best performing Asian currency, slid 1.3 per cent. The Bloomberg JPMorgan Asia Dollar Index dropped 0.3 per cent to snap a seven-day rally.
The yuan weakened even after the PBOC increased the rate around which the yuan can move for an eighth straight time, the longest streak since 2011, before the trade report showed a surplus of $60.34 billion, close to February's record of $60.62 billion. The PBOC increased the fixing by 0.28 per cent, the most since Nov. 10, to 6.3231.
The Bloomberg Dollar Spot Index was little changed as losses by emerging-market and commodity-producers' currencies were balanced by gains in havens such as the yen, euro and Swiss franc. The yen strengthened 0.2 per cent to 119.77 per dollar, helping to push the Topix index down by 0.8 per cent on its first day of trading this week. The euro advanced 0.3 per cent and the franc added 0.4 per cent.
New Zealand's dollar dropped 0.4 per cent from near its strongest level since July 14, while the Aussie weakened 0.6 per cent to 73.21 US cents. Both countries count China as their biggest trading partner given their commodity-driven economies.
Bonds
US Treasuries rose on their first day of trading this week, with yields on 10-year notes dropping four basis points, or 0.04 per centage point, to 2.05 per cent. German bunds were little changed.
Rates on Australian government debt due in a decade dropped five basis points to 2.66 per cent and New Zealand yields also fell. Ten-year Japanese bond rates were little changed at 0.32 per cent.
Commodities
West Texas Intermediate crude gained 1 per cent to $47.57 a barrel after sliding 5.1 per cent Monday, the most in six weeks. Brent added 0.9 per cent to $50.31 following a 5.3 per cent slump.
Global demand for oil is growing while non-OPEC countries are producing less, according to Abdalla Salem El-Badri, the secretary-general of Organization of Petroleum Exporting Countries. The 12-member group said it pumped 31.57 million barrels a day last month, the most since 2012, according to its monthly market report.
Nickel slipped 0.9 per cent to $10,560 a metric ton in London, while copper lost 0.7 per cent. Gold for immediate delivery fell 0.5 per cent to $1,157.63 an ounce following a two-day advance.
