World shares down as China dims growth outlook

The new mining tax will come into effect on July 1. Photo / Thinkstock

Equities in Europe and on Wall Street fell amid concern that China's economic strength is faltering after BHP Billiton warned that the nation's growth of steel production was slowing.

Steel output in China, the biggest producer, is easing, according to Ian Ashby, president for iron ore at BHP Billiton, the world's largest mining company. "Steel growth rates will flatten and they have flattened," Ashby said at a conference in Perth, Australia.

It was all stock markets needed to pause after a rally that has lifted benchmark indexes to multiple-year highs. In early afternoon trading in New York, the Dow Jones Industrial Average fell 0.40 per cent, the Standard & Poor's 500 Index shed 0.36 per cent and the Nasdaq Composite Index dropped 0.34 per cent.

In Europe, the Stoxx 600 Index dropped 1.1 per cent for the day.

"The news out of China caused everyone to look up and take a breath, but the sentiment hasn't changed. It's still bullish," Mike Shea, managing partner and trader at Direct Access Partners in New York, told Reuters.

In fact, Barton Biggs, the hedge-fund manager who increased bets on equities before the S&P 500 rallied this year, is getting more bullish, he told Bloomberg News.

"I've been gradually increasing and I'm up to 90 per cent now," Biggs, referring to the proportion of his fund that benefits from higher share prices, told Bloomberg. "There is an awful lot of money that is out of stocks and in very low-yielding fixed-income instruments. I think the odds are that money is going to migrate back."

Biggs said last month that his net-long position, a gauge of bullish versus bearish investments, in stocks is about 75 per cent, up from 65 per cent in January.

The US economy provided another sign of optimism, though few took their cues from these data today.

American new building permits jumped 5.1 per cent to a seasonally adjusted annual rate of 717,000 units in February, the highest since October 2008, according to the Commerce Department. That surpassed economists' expectations for an increase to a 690,000-unit pace.

"The data provides further evidence of a rebound in housing activity. Housing is being nursed back to health, but getting out of rehab takes time," Eric Green, chief economist at TD Securities in New York, told Reuters.

Also providing a positive perspective was Tiffany. Shares of the jewellery chain jumped more than 6 per cent after the company predicted higher sales this year, bolstered by expansion in Asia and the Americas.

Meanwhile, oil fell amid expectations of rising stock piles in the US, sending oil for April delivery 2.3 per cent lower to US$105.62 a barrel at 1.34pm on the New York Mercantile Exchange.

"US inventories continue to increase and there's a growing awareness that production is rising," Tim Evans, an energy analyst at Citi Futures Perspective in New York, told Bloomberg.