Metals Fall on Spending Cuts, Economy as Stocks Decline

Commodities dropped for a fourth day and stocks fell as $85 billion of spending cuts were set to be triggered in the U.S. and manufacturing slowed in China and the euro area. The 17-nation shared currency and the pound weakened while the Swedish krona strengthened.

The Standard & Poor’s GSCI gauge of 24 raw materials dropped 1 percent at 8:40 a.m. in New York as lead, aluminum and copper fell at least 1.7 percent and oil sank 1.3 percent. The StoxxEurope 600 Index slid 0.9 percent and S&P 500 Index futures lost 0.4 percent. The euro dropped below $1.30 for the first time in eight weeks. The pound tumbled 1 percent to $1.5018, whileSweden’s currency climbed at least 0.4 percent against its 16 major peers as fourth-quarter gross domestic product exceeded analyst estimates.

“Risk assets underperformed as data such as PMIs reinforced a view that we are in a low growth environment,” said Michael Quach, investment strategist in London at Smith & Williamson Investment Management, which has $19 billion in assets. “Stimulus and other confidence boosting measures provided by central banks around the world have helped to reduce systemic risk, but there are still a lot of headwinds in the economy.”The U.S. Senate rejected a pair of partisan proposals to replace the automatic across-the-board spending reductions which the International Monetary Fund says will hurt global growth. Consumer spending rose in America in January, the Commerce Department said before reports on manufacturing and construction. Data showed China’s manufacturing slowed for a second month while factory output in the euro area contracted for the 19th straight month.

Dollar Gains

The dollar led gains in world markets last month, beating global measures of bonds, stocks and commodities, as the threat of U.S. budget cuts proved no barrier to investors snapping up American assets. Japan overtook China last year as the largest foreign holder of U.S. securities, including equities, asset- backed debt and Treasuries, the U.S. Treasury Department said.

The Dollar Index, which tracks the currency against six U.S. trading partners, climbed 0.5 percent today. Treasuries advanced for a second day, with the yield on 10-year notes falling three basis points to 1.85 percent.

The S&P GSCI of commodities fell to a two-month low and is heading for a fourth weekly decline, the longest streak since June. West Texas Intermediate oil dropped to $90.84 a barrel. Copper slipped 1.7 percent to the lowest since Nov. 28 and aluminum retreated for a 10th day, the longest slump since June. China is the biggest buyer of energy and industrial metals.

European coal for 2014 fell to a record $97.50 a ton.

Earnings Disappoint

The Stoxx 600 erased this week’s advance. The gauge climbed for nine months through February, the longest run of gains since 1997. Two shares fell for every one that gained in the Stoxx 600 today, with a gauge basic-resource stocks dropping 2.5 percent, the biggest decline among 19 industry groups.

Belgacom SA (BELG), the largest phone company in Belgium, fell 8.7 percent to a record low after forecasting earnings that trailed analyst estimates. Royal Vopak NV, the world’s biggest chemical and oil storage company, tumbled 15 percent as operating profit declined.

Thales SA surged 12 percent as Europe’s biggest maker of defense electronics reported earnings that topped estimates and started a review of regional and product focus to improve profitability.

The cost of insuring against default on corporate debt increased, with the Markit iTraxx Europe index of credit-default swaps linked to 125 investment grade companies rising 3.5 basis point to 120, the highest in three days.

Groupon Gains

The S&P 500 erased gains in the final minutes of trading yesterday, bringing its weekly drop to 0.1 percent. Groupon Inc. (GRPN) advanced 4.2 percent in pre-market trading as the largest daily- deal website ousted Andrew Mason as chief executive officer. The shares sank 24 percent yesterday after its revenue forecast missed analysts’ estimates.

Household purchases, which account for about 70 percent of the economy, climbed 0.2 percent after a 0.1 percent gain the prior month. The median estimate in a Bloomberg survey of 76 economists called for a 0.2 percent advance. U.S. manufacturing probably expanded for a third month, with a reading of 52.5 projected for the Institute for Supply Management’s factory index after a nine-month high of 53.1 in January, according to the median forecast of 81 economists surveyed by Bloomberg. Numbers greater than 50 signal expansion.

The euro slid 0.4 percent to $1.3005, after dropping to as low as $1.2986.

The pound fell against all of its main counterparts and the yield on the 10-year gilt fell eight basis points to 1.90 percent. A gauge of factory activity sank to 47.9, compared with a revised 50.5 in January and less than the 51 reading in a Bloomberg survey.

Surprise Growth

The krona climbed to its strongest level against the euro since Sept. 3 after Sweden avoided the contraction most economists predicted in the fourth quarter. It appreciated 0.8 percent to 8.3714 per euro.

Japanese bonds surged after a report showed lingering deflation. The 10-year bond yieldtouched 0.64 percent, the lowest since June 2003. The Bank of Japan (8301) may add monetary stimulus as early as April as prospective governor Haruhiko Kuroda looks to demonstrate a more aggressive approach to tackling 15 years of falling prices. The yen slipped 0.4 percent per dollar.

The MSCI Emerging Markets Index (MXEF) slid 0.3 percent. The Hang Seng China Enterprises Index of mainland companies fell 0.8 percent and the Shanghai Composite Index slipped 0.3 percent. The official Purchasing Managers’ Index was 50.1 in February, the weakest in five months and less than the 50.5 median estimate in a Bloomberg News survey of 31 analysts. Commodity producers led Russia’s Micex Index down 0.7 percent and Brazil’s Bovespa index lost 1.1 percent.