Oil falls with Hong Kong shares, copper on China, Ruble rebounds

[WELLINGTON] Oil retreated while Hong Kong shares and industrial metals slipped after Chinese industrial profits fell the most since at least 2011. European equity-index futures were little changed after the region's stocks hit a seven-year high amid speculation Greece will stay in the euro region.

Oil in New York slipped 0.4 per cent to US$44.96 a barrel, while Brent slid 0.4 per cent by 7:24am in London. Copper fell 0.5 per cent. The Hang Seng Index retreated 0.5 per cent. Futures on the Euro Stoxx 50 Index added 0.1 per cent while Standard & Poor's 500 Index contracts decline as a historic snowstorm lashes the US east coast. Russia's ruble gained 1.8 per cent after tumbling yesterday when S&P cut Russia's foreign-currency rating to junk.

Chinese industrial profits declined 8 per cent in December, the most since at least 2011, data on Tuesday showed. Oil prices are sliding ahead of US supply data this week that's estimated to show a further expansion in stockpiles. European finance ministers signaled willingness to work with Greek Prime Minister-elect Alexis Tsipras as long as he drops demands for a debt writedown, a central plank of the victorious Syriza party's election platform.

Oil "supply is still the issue, we need to see that cut back," David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. "The potential is still for the downside in the near term because of that need to see a reduction in current production. Demand doesn't improve rapidly on the falling price, it does take a while to kick in."

West Texas Intermediate crude was lower today after sliding more than 5 per cent over the past three trading days amid ongoing concern over the global supply glut for oil. WTI settled at US$45.15 a barrel on Monday, the lowest price since March 11, 2009.

US Supply Stockpiles of crude in the US, the world's biggest oil consumer, probably increased by 4.25 million barrels last week, according to a Bloomberg News survey of energy analysts before government data on Wednesday. Brent traded at US$47.95 a barrel in London.

The Shanghai Composite Index retreated 0.9 per cent and a gauge of mainland companies in Hong Kong retreated 1.6 per cent after the industrial profit report. The Hang Seng Index fell from a four-month high. Tencent Holdings Ltd, operator of China's largest instant messaging service and the best- performing stock on the Hang Seng Index this year, fell 1.6 per cent after closing at a record yesterday.

Prada SpA, the Italian luxury-goods maker that gets more than 60 per cent of its revenue outside Europe, jumped 6 per cent in Hong Kong, the most since June. The stock was raised to overweight from neutral by HSBC Holdings Plc analyst Erwan Rambourg on Monday.

JGBs Fall Australia's S&P/ASX 200 Index rose 0.8 per cent and the Kospi index in Seoul gained 0.9 per cent. Japan's Topix index added 1.7 per cent as the yield on 10-year Japanese bonds rose by four basis points to 0.256 per cent.

In the US, the S&P 500 rose for the fifth time in six days, adding 0.3 per cent on Monday. Microsoft Corp lost 4.4 per cent in extended trading after reporting lower-than-expected sales of software licenses for the fiscal second quarter.

The euro was little changed at US$1.1243. The yen climbed 0.4 per cent to 117.97 per dollar and 0.4 per cent to 132.63 per euro.

Mr Tsipras, 40, has pledged to keep Greece within the euro area as he negotiates a writedown of Greek debt and eases budget constraints that were imposed in return for aid after the country's economic collapse.

Stalled Talks Greece's current round of funding expires Feb. 28 and talks with the so-called troika - the International Monetary Fund, the European Commission and the European Central Bank - for its renewal have stalled since September amid demands for further belt tightening.

"Uncertainty is likely to remain elevated until we get clear confirmation from Syriza that they will negotiate constructively with creditors," Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand Ltd, wrote in a client note today. "There is a giant game of chicken going on, no one wants a 'Grexit'."

Greek 10-year bonds fell on Monday, pushing yields on the 2025 securities up 68 basis points, or 0.68 per centage point, to 9.09 per cent, after the rate dropped 56 basis points on Jan 23. The country's benchmark equity gauge declined 3.2 per cent, paring a 6.1 per cent gain on Friday.

The ruble advanced to 67.5405 per dollar on Tuesday. The currency slumped 6.6 per cent against the greenback on Monday as S&P reduced Russia's rating one level to BB+ with a negative outlook, putting it below investment grade for the first time in a decade.

The US and the European Union also warned that Russia may face further repercussions after a rocket attack on the Ukrainian port city of Mariupol on Saturday. The US, NATO, and the OSCE said the attack came from rebel-held territory, while the separatists blamed Ukrainian government forces.

BLOOMBERG