U.S. Stocks Fall Amid Global Selloff on China, Greece

By Oliver Renick and Callie Bost  

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)

U.S. stocks dropped, following the worst loss in six weeks for the Standard & Poor’s 500 Index, as global shares slid after China tightened lending rules and concern grew that early Greek elections could trigger political turmoil.
The S&P 500 fell 0.7 percent to 2,046.93 at 9:31 a.m. in New York.
“To me this seems like a knee-jerk reaction with China,” Steve Bombardiere, an equity trader at Conifer Securities LLC in New York, said by phone. “We’ve had a run up, the market is certainly thinning out as we get closer to the end of the year and any move is going to be a little exaggerated.”
Global equities fell after China said lower-rated bonds can
no longer be used as collateral for some short-term loans, sparking a selloff in riskier debt that spread to government notes and stocks. Stocks in China tumbled the most since 2009 and the MSCI All-Country World Index dropped 0.8 percent.
The Stoxx Europe 600 Index lost 2 percent as Tesco Plc slumped, energy companies extended losses and U.K. manufacturing output unexpectedly fell for the first time in five months. Meanwhile, 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.
Oil touched a five-year low yesterday, stoking concern that lower demand points to a slowing global economy.

Global Growth

“Effectively the sell-off in Asia has led to broad-based selling across the globe,” Chad Morganlander, a money manager at St. Louis-based Stifel Nicolaus & Co., which oversees about $160 billion, said by phone. “This short-term decline is thematic of the concern about global growth as well as a potential concern about Federal Reserve action next week.”
The S&P 500 (SPX) has rebounded 11 percent from a low in October amid speculation the U.S. economy is strong enough to withstand a slowdown overseas and tighter monetary policy after the Fed wound up its asset-purchase program.
Fed officials are discussing the future of their vow to hold interest rates low for a “considerable time,” ahead of a meeting next week where they will weigh that pledge against signs of economic strength. The central bank will meet Dec. 16-17.

‘Considerable Time’

“There’s a feeling that the Fed is moving a bit faster than necessary on the tightening front,” said Thomas Thygesen, head of cross-asset strategy at Skandinaviska Enskilda Banken AB in Copenhagen. “Markets won’t like it if the Fed drops the ‘considerable time’ phrase next week. The slump in oil prices and the impact that will have on inflation is one more factor for the Fed to consider.”
The S&P 500 dropped 0.7 percent yesterday, following a seventh straight weekly gain that pushed the gauge to a record as better-than-estimated payrolls data increased optimism in the economy. The index ended the week trading at 17.3 times its members’ projected earnings, the highest valuation since 2009. The Dow also reached a record last week, climbing within 10 points of 18,000 before retreating.