Global Stocks Retreat on China, Greece; Yen, Gold Advance

By Lynn Thomasson and Jonathan Morgan

Dec. 9 (Bloomberg) -- Stocks fell around the world, led by the biggest drop for Chinese shares since 2009 after the government tightened collateral rules for short-term loans. The yen and gold climbed, while oil rebounded from a five-year low. Bloomberg’s Michael Regan reports on “In The Loop.” (Source: Bloomberg)

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Stocks fell around the world, as Chinese shares sank the most since 2009 amid speculation tighter lending rules may crimp growth. Greek equities led European securities lower on concern early elections could trigger renewed political turmoil. The yen and gold climbed.
Futures on the Standard & Poor’s 500 Index lost 0.8 percent as of 8:41 a.m. in New York. The Stoxx Europe 600 Index slid 1.6 percent, as Greece’s benchmark gauge tumbled 10 percent. The Shanghai Composite Index (SHCOMP) plunged 5.4 percent. West Texas Intermediate crude rose 0.9 percent. The yen strengthened the most in two months, while gold increased 1.4 percent.
China took one of its biggest steps yet to push local governments away from using opaque financing vehicles to raise money as policy makers seek to reduce leverage. U.K. manufacturing output unexpectedly fell for the first time in five months. Greece’s move to bring forward the
process for choosing a new head of state risks triggering parliamentary elections that could put in power a party that opposes the terms of the nation’s bailout by the European Union.
“Equity markets are driven this morning on the back of a Chinese selloff and oil prices not being able to find a bottom,” Ion-Marc Valahu, a co-founder and fund manager at Clairinvest in Geneva, said in a phone interview. “There is a growing feeling that if the price of oil goes down further, there is a risk of a further slowdown in the economy.”

Photographer: Sergio Dionisio/Bloomberg

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Greek Rout

In Greece, the ASE Index headed for its biggest drop in 27 years and yields on 10-year bonds rose 48 basis points to 7.73 percent. Prime Minister Antonis Samaras will have to rely on opposition votes to push through his pick for the mainly ceremonial post. Without their support, his government could fall, risking parliamentary elections in Europe’s most indebted state as early as January. Anti-bailout group Syriza, which currently leads in opinion polls, welcomed the announcement.
Lenders contributed the most to declines, with National Bank of Greece SA sliding 15 percent and Piraeus Bank SA losing 17 percent.
The Stoxx 600 headed for its largest two-day decline in seven weeks. A plunge in construction and energy companies dragged European shares down yesterday after a four-week rally.
Total SA (FP), France’s largest oil producer and BP Plc retreated more than 1.9 percent. WTI advanced amid competition between OPEC’s largest members, Iraq and Saudi Arabia. Oil futures are still down 35 percent this year.
Tesco Plc tumbled 9.7 percent after saying full-year earnings will be almost half an August forecast. Verizon Communications Inc. slipped 1.8 percent in early New York trading as phone discounts and promotions hurt profitability at its wireless business.

China Slide

In China, the value of equities changing hands on exchanges in Shanghai and Shenzhen reached a combined 1.24 trillion yuan ($200 billion), almost five times the one-year average. The Hang Seng China Enterprises Index (HSCEI), which tracks mainland Chinese stocks listed in Hong Kong, plunged 4.6 percent, while the Hang Seng Index dropped 2.3 percent.
The nation’s clearing agency for exchanges said yesterday it won’t allow bonds rated below AAA or sold by issuers graded lower than AA to be used as collateral for short-term loans obtained through repurchase agreements. The new rules sparked a retreat in lower-rated bonds of local government financing vehicles and contributed to a tumble in Shanghai shares as noteholders reassessed the appeal of owning such debt.
The yen and gold advanced as the decline in Asian stocks revived demand for a haven. Japan’s currency climbed 0.7 percent to 119.82 per dollar. Gold was up 1.4 percent to $1,211.70 an ounce.

Russia, Dubai

The ruble retreated 0.7 percent, trading near a record low on speculation the central bank will raise interest rates this week amid falling oil prices. The yield on 10-year local-currency bonds rose for an 11th day.
The Bank of Russia intervened in the currency market for the third time since moving to a free float last month, according to a statement on its website today.
Dubai’s benchmark stock index fell below 4,000 for the first time since July, as the slump in oil prompted investors to sell shares. The gauge lost 3.5 percent today. India’s CNX Nifty Index fell 1.2 percent after the country reported its widest current-account deficit in more than a year.