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Stocks bond gold sink on china fears Original Source Link: (May no longer be active)
http://www.forbes.com/personalfinance/funds/newswire/2004/04/28/rtr1351917.htmlhttp://www.forbes.com/personalfinance/funds/newswire/2004/04/28/rtr1351917.html
WRAPUP 1-U.S. stocks, bonds and gold sink on China fears
Reuters, 04.28.04, 6:55 PM ET
By Phil Berlowitz
NEW YORK, April 28 (Reuters) - Call it China syndrome.
Concerns that China may soon put the brakes on its red-hot economy sent U.S. stocks, bonds, copper and gold tumbling on Wednesday.
Only the dollar had its day in the sun.
The greenback rallied against the "commodity bloc" currencies, such as the Australian and Canadian dollars, and ended the day higher against the euro, the yen, the Swiss franc and sterling.
Prices of precious metals like gold and silver, as well as industrial metals like aluminum and copper plunged along with soybeans and cotton, after China's Premier Wen Jiabao told Reuters the country may take forceful action to slow down its economy. A government plan to rein in inflation probably would limit money available for steel, cement and aluminum projects.
"Today we saw a commodity-driven rally in the U.S. dollar after China's premier urged reducing China's soaring demand for commodities, which sent told to six-month lows and boosted the dollar across the board," said Ashraf Laidi, chief currency analyst at MG Financial Group in New York.
Wall Street was also beset with worries about rising interest rates and heightened tensions in Iraq, which overshadowed investors' recent enthusiasm about strong corporate profits.
Shares of metals and mining companies were the hardest hit, led by aluminum producer Alcoa Inc. (nyse: AA - news - people), the Dow's biggest percentage loser, on concerns that credit restrictions in China could slow its growth and curb its huge appetite for raw materials. Alcoa lost $1.29 or 4 percent to $31.01.
The voracious demand of the world's most populous country with the sixth-largest economy has been driving up prices of a wide range of commodities for several months.
The Dow Jones industrial average <.DJI> fell 135.56 points, or 1.29 percent, to 10,342.60. The Standard & Poor's 500 Index <.SPX> dropped 15.70 points, or 1.38 percent, to 1,122.41, and the technology-focused Nasdaq Composite Index <.IXIC> fell 42.99 points, or 2.12 percent, to 1,989.54.
Speculation that the Federal Reserve may soon hike short-term interest rates to forestall inflation was putting investors on guard, particularly with gross domestic product data due on Thursday and a Fed policy-setting meeting next Tuesday.
FOR STOCKS, 'AS GOOD AS IT GETS?'
First-quarter earnings from U.S. companies have shown solid improvement over the previous year. But concerns are mounting that the market may already reflect corporate America's rapid recovery.
"It's pretty clear that the good earnings news we're getting was the reason for last year's big rise, so most of this earnings news is priced in," said Edgar Peters, chief investment officer at PanAgora Asset Management Inc. "There is a chance that this is as good as it gets."
GOLD, COPPER, SOY AND OIL FALL
In New York, COMEX June gold futures <0#GC:> plummeted $13.20 to end at $385.90 an ounce, after falling as low as $384.00, its cheapest since Nov. 7, 2003. May silver fell 36.8 cents to $5.867 an ounce, after bottoming at $5.825, its lowest since Dec. 24.
COMEX May copper fell 5.75 cents to $1.1775 a pound. During the day, it sank to $1.1630, its lowest since Feb. 10.
In Chicago, CBOT soybeans fell sharply on concerns of a possible drop in demand from China, the world's top soybean importer and the largest buyer of U.S.-grown supplies. The July soybean contract fell 14 1/2 cents to $9.80 per bushel.
At the New York Cotton Exchange, the July contract fell 3.0 cents, or almost 5 percent, to 59.63 cents a lb.
On the New York Mercantile Exchange, crude oil futures eased on profit taking after hitting a 3-1/2-year high. NYMEX June crude oil ended 7 cents lower at $37.46 a barrel.
Gasoline futures, however, rose 1.7 percent as government data showed a decline in reformulated gasoline stocks sold in smog-prone cities. Concerns were also mounting of a supply crunch during the peak summer driving season. NYMEX June gasoline rose 1.95 cents to $1.2212 a gallon.
DOLLAR UP, TREASURIES DOWN
The euro fell 0.8 percent against the dollar to $1.1832 , pressured by the sell-off in the commodity currencies and on rising expectations of higher U.S. interest rates in the near future. The dollar climbed to 110.20 yen before drifting to 110.12 yen, up 0.62 percent on the day.
In the U.S. Treasury bond market, investors worried that China's renewed effort to prevent its economy from overheating could lead to reduced demand for Treasuries from the Asian giant, said Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co.
The two-year note lost 8/32 to 98-18/32, pushing its yield up to 2.26 percent from 2.15 percent late Tuesday.
The benchmark 10-year note dropped a full point in price to 95-31/32, driving its yield to 4.50 percent -- the highest closing level since September -- from 4.39 percent.
The 30-year bond slid 1-7/32 to 101-8/32, lifting its yield to 5.29 percent from 5.20 percent.
The FTSE Eurotop 300 index <.FTEU3> of pan-European blue-chips closed on its low, down 1.42 percent at 1,010.41.
The benchmark Nikkei average<.N225> shed 0.34 percent to close at 12,004.29.The Tokyo exchange will be closed on Thursday and for the first three days of next week for Japan's "Golden Week" holidays. (Reporting by Elizabeth Lazarowitz, K.T. Arasu, Pedro Nicolaci da Costa, Manuela Badawy, Gene Ramos, Lincoln Feast and Mariko Katsumura)
Copyright 2004, Reuters News Service
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