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Midday Market Report: China Slowdown Spooks Commodities, Equities


Demand for commodities is expected to fall as China's economy slows down.

Fears of a slowdown in China threw off global stocks and commodities markets today.

Chinese central planners raised gasoline prices for the second time in less than two months. Drivers in China lined up to wait for fuel before the price increase kicks in. BHP Billiton (BHP), the metals mining company, said that steel production in China is slowing down. China reported a record trade deficit recently and cut its forecast of economic growth for the year. As goes China, so go commodities. Orange juice, lumber, copper, silver, corn, oat, and soybean oil futures all fell at least 1.5% today. Energy and commodities companies are also off.

Following Asian stocks, European shares fell for the second day in a row.
  • The Eurostoxx 50 (^STOXX50E) fell 1.22% to 2,576.61.
  • The FTSE 100 (^FTSE) dropped 1.17% to 5,891.41.
  • Germany's DAX (^GDAXI) fell 1.39% to 7,054.94.
Swiss mining giant Glencore International has agreed to buy Viterra, a Canadian agribusiness company. Glencore will pay $6.15 billion, 48% more than Viterra's price before initial expressions of interest. Glencore stands to gain a solid foothold in the Australian and Canadian grain markets through the acquisition.

US stocks are showing losses. All sectors are in the negative. Disappointing housing starts data came out this morning, showing a 1.1% decline from a three-year high in January.
  • The Dow (^DJI) lost 0.43%, falling to 13,182.30.
  • The S&P 500 (SPY) fell 0.46% to 1,403.26.
  • The Nasdaq (^IXIC) dropped 0.42% to 3,065.
Lions Gate Entertainment (LGF) advanced 3% today thanks to the hype around The Hunger Games, an upcoming movie about teenagers killing one another on live television. We saw this ourselves near the Minyanville office, where teenagers are lined up around the block for a book signing with Hunger Games author Suzanne Collins at Barnes & Noble (BKS). The popular book is published by Scholastic Corp (SCHL).

This year's more or less consistent rally has restored wealth to America's luxury consumers. Tiffany & Co. (TIF) is one company that has received a windfall as a result. Tiffany forecasted better-than-expected profits for the year, and shares have surged 7% today so far.

Fears of a war in the Strait of Hormuz eased today, and so did oil prices. Sheikh Sabah al-Ahmad al-Sabah, the ruler of Kuwait, said that Iranian officials assured him that Iran will not close the strait. Saudi Arabia also promised to increase oil exports to make up for any shortages from Iran. WTI dropped 1.74% to $106.21/barrel, and Brent fell 1.24% to $124.15/barrel.

Harvard University economics professor Jeremy Stein, one of the president's nominees to the Federal Reserve board, suggested that if the recovery picks up pace, the central bank will have to rethink its promise to keep interest rates close to zero until 2014.

Twitter: @vincent_trivett
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