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Commodity markets were hit and stocks and bonds were in the firing line on Monday, as expectations for a first increase in US interest rates in almost a decade next month pushed the dollar to a seven-month high.
European stocks were down 0.5 per cent despite better-than-expected euro zone data. In tandem with global markets most Indian stocks dropped, with declines in metal producers countering advances in automakers and energy companies.
Snapping its two sessions of gains, the benchmark BSE Sensex on dropped over 49 points, or 0.19 per cent, to close at 25,819.34 after oscillating for most part of the day, as mood remained cautious ahead of derivatives expiry in a holiday-shortened week.
The 50-share National Stock Exchange's Nifty ended down 7.30 points, or 0.09 per cent, at 7,849.25 after shuttling between 7,877.50 and 7,825.20.
Rout in commodities
Industrial metals copper and nickel plunged and oil prices whipsawed, while the euro fell as low as $1.06, as the prospect of more policy easing by the ECB in Europe was compounded by a security lockdown in Brussels.
Copper slumped to a fresh six-and-a-half year low and nickel dived more than four per cent to its lowest since 2003, as traders bet metals prices still had further to fall, given slowing factory demand in China.
Oil prices were highly volatile, with US crude off $1.30 or three per cent at $40.60 a barrel at one point and Brent down two per cent at $43.57 before both jumped on comments from Saudi Arabia on co-operation with other producers. That put commodity-linked currencies such as the Russian rouble on another ride.
"The biggest factor here is the dollar," said Hans van Cleef a senior energy economist at ABN Amro in Amsterdam. "It is having an impact on all major commodities at the moment."
Gold for immediate delivery was down 0.9 per cent at $1,068.90 an ounce. Assets in exchange-traded products backed by gold have fallen to the lowest since 2009. Money managers are holding a net-short position in the metal for first time since August as their long wagers shrunk to the smallest in seven years. Zinc lost 3.2 per cent, giving up gains made on Friday after Chinese smelters announced plans to cut production.
The London Metal Exchange's index of six industrial metals has plummeted 27 per cent this year, the worst annual performance since the global financial crisis in 2008.
Stocks
The Stoxx Europe 600 Index fell 0.5 per cent lower and the MSCI Asia Pacific excluding Japan Index retreated 0.3 per cent, with materials shares losing 0.7 per cent. BHP Billiton declined 2.1 per cent.
RWE AG declined 5.6 per cent after a report that its chief executive officer is having trouble finding funding for growth. Credit Suisse Group AG dropped 1.4 per cent after completing a share placement for 1.32 billion francs ($1.3 billion). Playtech Plc tumbled 8.2 per cent after agreeing to terminate a merger agreement with Plus500 Ltd.
Standard & Poor's 500 Index E-mini futures expiring next month slipped 0.2 per cent after the gauge had its biggest weekly jump of the year. Pfizer Inc. fell more than 2.4 per cent in early New York trading after announcing a $160-billion merger with Allergan Plc. Lions Gate Entertainment Corp. dropped 3.6 per cent after the film finale of "The Hunger Games" had the smallest debut of any in the series.
Reports in the US will show that a manufacturing gauge slipped in November, and existing home sales declined in October, according to economist estimates.
Emerging Markets
The MSCI Emerging Markets Index dropped 0.2 per cent after the biggest weekly gain in more than a month.
The Hang Seng China Enterprises Index fell for the first time in three days, sliding 0.7 per cent. Guotai Junan International Holdings Ltd. tumbled 12 per cent after the brokerage said its chairman and chief executive officer can't be contacted.
The Shanghai Composite Index declined 0.6 per cent after regulators gave the green light to initial public offerings following a five-month freeze.
Argentine exchange-traded funds extended gains after Macri's election victory. The Global X MSCI Argentina ETF rose 0.4 per cent in German trading and global depositary receipts for Grupo Clarin SA, an Argentine media business, climbed 2.9 per cent, heading toward the highest close since 2008.
Currencies
Russia's rouble weakened 1.4 per cent, Chile's peso slid 0.9 per cent and New Zealand's dollar lost 0.7 per cent. A Bloomberg gauge of 20 developing-nation currencies declined for the first time in five days, falling 0.4 per cent.
"Emerging markets are under pressure as U.S. raising interest rates in December is a done deal," said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. in Hong Kong. "The dollar will get stronger while China's economic fundamentals haven't shown any signs of improvement."
The euro earlier sank to a seven-month low of $1.0601 after European Central Bank chief Mario Draghi said Friday that he and his fellow bank officials "will do what we must" to boost price growth.
Bonds
Government bonds across the euro-area fell at the start of a week of auctions of benchmark securities. The yield on Germany's 10-year bund jumped five basis points to 0.53 per cent. Italy's 10-year rose three basis points to 1.53 per cent.
Belgium started the glut with sales of 2025 and 2028 securities Monday that saw borrowing costs decline from previous auctions.
Treasuries also fell, following a two-week advance, with 10-year yields increasing one basis point to 2.28 per cent, according to Bloomberg Bond Trader data. The US is scheduled to sell $26 billion of two-year notes Monday.
The likelihood of higher Fed rates by year-end is 72 per cent, futures show. That's the highest since August and up from 50 per cent at the end of October. The calculation is based on the assumption that the effective fed funds rate will average 0.375 per cent after the first increase.
