* World stocks hit six-week lows; Brent crude falls
* China's Nov factory sector shrinks the most in 32 months
* Euro at six-week low versus dollar after Bund auction
By Dominic Lau
LONDON, Nov 23 World stocks hit their
lowest in six weeks on Wednesday and oil prices fell after
China's November factory activity shrank at its sharpest pace in
32 months, reviving fears of an abrupt slowdown for the world's
second largest economy.
Adding to global growth concerns, manufacturing in European
heavyweight Germany contracted for a second straight month, and
at a faster rate, as export demand slumped.
"The souffle we hoped we were going to eat is collapsing in
front of us. We had hoped for a soft landing in China, better
figures out of the United States and progress in Europe," Justin
Urquhart Stewart, director at Seven Investment Management, said.
The evidence of weakening in China, whose
rapid growth has provided a major prop for the world economy,
came a day after the United States cut its third quarter growth
However, the rush to safe-haven assets has pushed returns on
them so low that they are less attractive to hold.
Germany's debt auction on Wednesday was technically
uncovered, sending the yields on 10-year German Bunds
6.6 basis points higher to 1.977 percent -- still
lower than inflation. Meanwhile, the euro zone's sovereign debt
crisis is eating into business and consumer confidence as well
as leaving investors with ever decreasing options.
The other concern about holding German paper is over the
cost to Berlin of the escalating crisis.
"It is a complete and utter disaster," said Marc Ostwald,
strategist at Monument Securities in London.
"It really tells you that the Bund yields are at the
completely wrong level ... never mind that they are a safe
haven. There's certainly a partial element of 'they (investors)
would rather not have euros' in there."
Nevertheless, the poor auction results hurt the euro, which
fell to a six-week low against the dollar. The common currency
was down 0.9 percent at $1.3395.
"This is a poor German bond auction we talking of, not a
peripheral euro zone economy," said Ankita Dudani, G-10 currency
strategist at RBS Global Banking.
"It adds fuel to the fire and adds pressure on the European
Central Bank to do something (about the debt crisis). Having
said that, I think the euro's losses are likely to run out of
steam around these levels with investors likely to be light
ahead of Thanksgiving."
The dollar, which has been benefiting from recent investor
unease, rose 0.7 percent against a basket of major currencies
to hit its highest in six weeks.
U.S. stock index futures fell around
0.7 percent, signalling a weak open for Wall Street.
STOCKS HIT SIX-WEEK LOW
World stocks measured by the MSCI All-Country World Index
fell 0.6 percent to their lowest level since
The global gauge was down for the eighth straight session,
its longest losing run since late July and early August when the
debt crisis that began in Greece two years ago spread to Italy.
The world index has lost 13.7 percent this year.
Europe's FTSEurofirst 300 was flat, while Japan's
Nikkei average eased 0.4 percent.
Brent crude dropped 1.1 percent to trade below $108
a barrel, while copper prices slipped 1.3 percent to
above $7,200 a tonne.
Gold eased 0.5 percent after rising 1.1 percent the
previous session. The precious metal has risen nearly 20 percent
this year, on track for its 11th straight year of gains.
However, the pace of deterioration in European, U.S. and
Japanese companies' earnings momentum moderated, Thomson Reuters
I/B/E/S data showed, indicating analysts' downbeat outlook on
corporate profitability had eased, which may give equities some
support amid the concerns over the euro zone debt crisis.
The data showed earnings momentum -- analysts' upgrades
minus downgrades as a percentage of total estimates -- for STOXX
Europe 600 companies was -15 percent, versus -19.8
percent a month ago.
S&P 500 companies' earnings momentum moderated to
-3.4 percent from -18.2 percent last month, while that for
Japan's Topix companies was -8.5 percent, from -11.2
percent in October.
(Additional reporting by Brian Gorman, Anirban Nag, Marius
Zaharia and William James in London; Editing by Ruth