Asian stocks set for worst monthly drop in three years on global rout

HONG KONG - Asian shares fell on Monday and looked set for their worst monthly performance in three years after top Federal Reserve officials kept the door open for an interest rate hike in September and Chinese stock markets took a fresh tumble.

Global markets are bracing for Chinese data on Tuesday which is expected to show the world's second-largest economy is continuing to lose momentum.

A Reuters poll showed China's official factory sector activity likely fell to a 3-year low.

U.S. business surveys, factory orders, trade data and non farm payrolls will also be released this week, keeping investors on edge after one of the wildest trading weeks of the year.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.8 percent and is set to fall 10 percent this month, its worst monthly drop since May 2012.

Japan's Nikkei was down more than 1 percent and South Korea's Kospi shed 0.6 percent. Australian shares lost 1.2 percent.

Selling intensified as China markets extended declines. By midmorning, Shanghai stocks, the epicenter of this month's whip-saw action, were down 3 percent. They have plunged more than 40 percent since mid-June.

U.S. stock futures shed 1 percent, pointing to weakness on Wall Street later in the day.

"Overall sentiment towards emerging markets continue to be quite cautious," said Frances Cheung, Asia strategist at Societe Generale in Hong Kong.

"Unless we see a decisive trend forward in the trajectory of U.S. interest rates, investors will continue to be wary of emerging market assets."

U.S. Federal Reserve Vice Chairman Stanley Fischer, speaking at the central bank's conference in Wyoming, said recent volatility in global markets could ease and possibly pave the way for a rate hike.

"The release of U.S. ADP employment on Wednesday and non-farm payrolls on Friday will be key in analyzing the quantum of a September rate hike," Angus Nicholson, market analyst at trading services provider IG in Melbourne, wrote in a note to clients.

Prospects of higher interest rates and returns in the United States combined with China's slowdown have diminished the appeal of emerging markets as investors have dumped riskier assets.

Investors sold $5.9 billion of emerging market assets between Aug 20-26, a sharp increase from $1.5 billion the week earlier, according to Nomura fund flows data.

Credit markets, often a harbinger of things to come for equities, spelt further pain in store for emerging markets.

An index for Asian high-yield credit has fallen sharply compared to a relatively steady performance in the investment grade index, according to Thomson Reuters data.

The dollar eased 0.4 percent to 121.15 yen after rising to the week's high of 121.76 on Friday following the Fed officials' comments that kept prospects of a September hike alive.

The euro was up 0.5 percent at $1.12405  after touching an eight-day low of $1.1156 on Friday.

The market will watch Thursday's policy meeting to see if the European Central Bank will be inclined to ease monetary policy further in the wake of the recent global markets turmoil, though no imminent change is expected.

U.S. crude oil prices dipped early on Monday as their biggest two-day surge in quarter of a century ran its course.

U.S. crude was down 0.8 percent at $44.86 a barrel after jumping more than 6 percent on Friday on frenetic short-covering fueled by violence in Yemen, a storm in the Gulf of Mexico and refinery outages.

The contract was still down nearly 5 percent on the month, when it hit a 6-1/2-year low last week in the wake of China-led global growth fears.

source: interaksyon.com

Asian stocks near 2015 lows on China economy worry, dollar strong

HONG KONG - An index of Asian shares outside Japan fell close to this year's lows thanks to a deepening selloff in commodities and concerns over slowing growth in China, while the dollar held its ground against a basket of currencies.

China's factory activity shrank more than initially estimated in July, contracting by the most in two years as new orders fell, according to a private survey that dashed hopes that the economy may be steadying.

"We believe the stock market panic in early July chilled economic activity, which is what the manufacturing PMIs picked up," ING economist Tim Condon said in a research note ahead of the Caixin PMI release.

MSCI's broadest index of Asia-Pacific shares outside Japan fell more than 1 percent before paring losses to be down 0.9 percent. The biggest losers were financials and cyclicals. The index's low for this year was on July 8.

Stock markets across the region declined with Japan's Nikkei down 0.5 percent and South Korea's Kospi falling 0.9 percent.

"We believe the macro environment remains challenging for emerging market assets amid headwinds of low commodity prices, concerns over China and a looming Fed tightening cycle," Barclays strategists wrote in a daily note in clients.

Recent flows data confirm that trend. Net foreign selling from emerging Asia has reached nearly $10 billion over the past two months with only India seeing some tiny inflows.

Although outflows have pummeled stock markets from Korea to Taiwan, valuations suggest more downside is likely.

While recent weakness in stocks has made emerging market valuations more attractive than those of developed market counterparts, they are twice as expensive as Asian financial crisis lows, according to research from Julius Baer.

On Wall Street on Friday, the Dow lost 0.3 percent and the S&P 500 shed 0.2 percent, due to a drop in energy shares.

In currencies, the dollar on Monday held broadly steady at 123.97 yen. The euro was steady at $1.1097.

While recent dollar moves have been buffeted by U.S. economic data, the broader trend was on the upside after the Federal Reserve last week left the door open for a possible interest rate increase in September.

The U.S. dollar has rallied 7.75 percent so far this year against the world's main trading currencies, after a 12.8 percent rise last year.

And "the dollar's recent rally may just be getting started," according to research from the BlackRock Investment Institute.

"Since the 1970s when the Bretton Woods fixed-currency regime ended and currencies began floating, a typical dollar rally has lasted roughly six to seven years," according to Russ Koesterich, BlackRock global investment strategist, who noted dollar rallies tend to be self-reinforcing, leading to greater inflows into U.S. assets in expectation of further dollar appreciation.

That traditionally is also a headwind for emerging markets, which have an inverse relationship to the dollar.

Commodities too are singing the emerging market blues.

Crude oil continued to flounder after posting its biggest monthly drop since 2008 in July on China's stock market slump and signs that top Middle East producers were pumping out crude at record levels.

U.S. crude was down 0.7 percent at $46.81 a barrel after losing 21 percent in July.

Copper prices fell 10 percent in July, the worst month since January and are now at their lowest levels since June 2009.

Overall the Reuters commodity index fell 10.8 percent in July, its biggest monthly fall since September 2011.

Reflecting the economic slowdown in China and sluggish growth in Europe and the Americas, international trade is also slowing.

Bonds were the sole bright spot.

The benchmark 10-year note yield held firm at 2.21 percent while 10-year Japanese bond yields stabilized at 0.41 percent.

source: interaksyon.com

Asian shares erase gains, China factory weighs

TOKYO - An index of Asian shares erased its early gains on Tuesday after a measure of Chinese factory activity unexpectedly skidded to an 11-month low.

The flash HSBC/Markit Purchasing Managers' Index (PMI) dipped to 49.2 in March, below the 50-point level. Economists polled by Reuters had forecast a reading of 50.6, slightly weaker than February's final PMI of 50.7.

MSCI's broadest index of Asia-Pacific shares outside Japan was down about 0.1 percent.

The private survey signaled persistent weakness in the world's second-largest economy that is likely to add to calls for more policy easing from Beijing.

"A renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers," Annabel Fiddes, an economist at Markit said.

The Shanghai Composite Index, which has recently pushed to seven-year highs, sagged 0.3 percent in early trading. Japan's Nikkei stock average slipped about 0.5 percent, pulling away from the previous session's 15-year highs.

The U.S. dollar edged slightly higher on the day, but still remained well off its recent highs as investors bet that the U.S. Federal Reserve will stay its hand on hiking interest rates in the months ahead.

Underscoring that the long-term view remains intact but the near-term is unclear, Fed Vice Chair Stanley Fischer, the central bank's second-in-command, said on Monday that the Federal Reserve is "widely expected" to begin raising interest rates this year though the policy path remains uncertain.

Fischer said the stronger dollar and weaker oil prices figure in U.S. policymaking, but said the central bank is "trying to look through those phenomena."

The dollar plunged last week after the Fed cut its inflation outlook and its growth forecast. The market consensus is that the Fed will hold off raising rates until at least September, rendering short-term directional bets difficult to make.

The dollar index, which tracks the greenback against a basket of six major rivals, edged up about 0.2 percent to 97.179 .DXY, but remained below its 12-year peak of 100.390 struck on March 13.

The dollar was up 0.1 percent on the day against its Japanese counterpart at 119.80 yen, but remained well below Friday's session high of 121.20 and levels above 122 yen touched earlier this month.

The euro stood at $1.0923, down about 0.2 percent from the previous session but still well above a 12-year nadir of $1.0457 plumbed last week before the Fed's statement.

The euro got a lift against the dollar on Monday after European Central Bank President Mario Draghi said he expected consumer prices to rise gradually by the end of the year even if they might remain very low or negative in the months ahead.

Some market participants took this as a sign that the ECB might wrap up its bond-buying scheme early, though Draghi said it intended to carry out purchases at least until end-September.

The weaker dollar lent support to dollar-denominated commodities, though some investors took profits on recent rallies. U.S. crude futures edged down about 0.4 percent to $47.28 a barrel after soaring 1.9 percent in the previous session.

Spot gold edged down about 0.2 percent after a four-day rally, to $1,187.10 an ounce.

source: interaksyon.com

Asian shares track Wall Street lower, yen gains

SYDNEY - Asian share markets slipped on Friday as troubles at a small Portuguese bank managed to wrongfoot investors already made anxious by the US earnings season and a spate of disappointing economic data globally.

Tensions in the Middle East also continued to simmer with Israeli officials seeming to hint at a possible assault on Gaza by ground forces.

As a result, yields on safe-haven US and German debt fell, the yen scaled a five-month peak against the euro and gold hit a three-and-a-half month high.

Japan's Nikkei fell 0.7 percent, while Australia eased 0.4 percent. MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.3 percent.

Analysts emphasised that the woes of one Portuguese bank were no threat to the sovereign's rating and rather the news served as an excuse to book profits on what has been a long rally in European stocks and bonds.

Indeed, there were signs investors were taking money out of peripheral euro zone debt and seeking higher returns in the emerging world. It was notable that MSCI's index of emerging market stocks actually rose on Thursday having hit a 17-month peak earlier in the week.

In contrast, European stocks were buffeted as trading in Banco Espirito Santo was halted after a 19 percent drop. The bank's largest shareholder suspended trading in its own shares and bonds due to "material difficulties" at its own largest shareholder.

The damage was all the greater as data showed unsettlingly weak readings for May industrial production in France and Italy. These followed equally disappointing numbers from Germany and the UK, which has led many analysts to cut their estimates of economic growth for the second quarter.

Portugal's market fell 4.2 percent and Italy's FTSE MIB 1.9 percent, pulling down the European index by 0.78 percent.

While the fate of a relatively minor bank in Europe would not normally have had much affect on Wall Street, it was enough to make investors reconsider the market's high valuations as the earnings season gets into full swing.

The S&P 500 index fell 0.41 percent, while the Dow eased 0.42 percent and the Nasdaq 0.52 percent.

The S&P 500 financial sector index fell 0.5 percent and Wells Fargo & Co, which reports earnings later Friday, lost 0.7 percent.

With stocks off the boil, Treasuries picked up the usual safe-haven bid for shorter-term debt which is prized for its deep liquidity. Yields on two-year notes fell over 4 basis points to 0.4561 percent, a marked reversal from a high of 0.5360 percent hit just on Wednesday.

German debt played much the same role in Europe, where yields on 10-year bund yields ended at a 14-month trough of 1.20 percent. Bonds in the euro zone periphery were not so lucky, with yields on Portuguese, Spanish and Italian paper all rising sharply.

The itch for safety benefited the Japanese yen which climbed a full yen to 137.76 per euro. The dollar dipped to 101.26 yen even as it gained on the euro to $1.3599.

Yet the higher-yielding Australian and New Zealand dollars remained well supported, again suggesting there was no widespread retreat from risky assets.

In commodities, gold was up at $1,336.01 having touched a 3-1/2 month top of $1,345.00.

Oil prices fell anew after a brief rally on Thursday. Brent was off 13 cents at $108.54 a barrel, while U.S. crude eased 16 cents to $102.77.

source: interaksyon.com

Asian shares hit four-month high on China data, Yellen

TOKYO - Asian shares hit four-month high on Tuesday after China's official PMI survey showed manufacturing managed to continue expanding in March, and dovish comments from Federal Reserve Chair Janet Yellen.

MSCI's broadest index of Asia-Pacific shares outside Japan rose by up to 0.3 percent to reach its highest level since early December.

China's official Purchasing Managers' Index increased to 50.3 in March from February's 50.2, in line with economists' forecasts. Above 50 indicates expansion, below 50 signifies contraction.

While the PMI figure alone is unlikely to dispel concerns of a slowdown in China, investor sentiment has improved on China in recent weeks as they expect Beijing will adopt a stimulus plan to achieve its growth target.

Shares were also supported after Fed chair Yellen reinforced the need for "extraordinary" commitment to support the U.S. economy, seemingly tempering expectations of a sooner-than-expected start to the rate-hike cycle.

Yellen gave a strong defense of the Fed's easy-money policies in her first public speech since becoming Fed chair two months ago, saying there remains "considerable" slack in the economy and job market.

"It seems like she expressed her own dovish ideas. There's nothing really new and the outlook of the Fed's policy has not changed that much but the markets like her remarks," Makoto Noji, senior strategist at SMBC Nikko Securities.

Emerging markets, which suffered a sharp selloff earlier this year on concerns about a turn in Fed policy, slowdown in China and political instability in some countries, appeared to have regained some stability.

MSCI emerging market index hit a three-month high on Monday, having outperformed S&P 500 since late March. Among them, Brazilian shares hit four-month high.

Rising risk appetite undermined low-return assets that had attracted safety bids last month at the height of the Ukrainian crisis.

Gold hit a seven-week low of $1,282.04 per ounce on Monday, despite Yellen's dovish comments while the yen also slipped to a three-week low against the dollar of 103.44 yen and a nine-month low against the risk-sensitive Australian dollar at 95.75.

The euro bounced back against the U.S. dollar to fetch $1.3773 even as softer-than-forecast inflation numbers put more pressure on the European Central Bank to act against the threat of deflation.

Euro zone inflation dropped to 0.5 percent in March, its lowest level since November 2009, having been in the ECB's "danger zone" of below 1 percent for six consecutive months.

However, not many market players expect the ECB to act at its policy meeting on Thursday, partly because of comments from ECB council member and Bundesbank President Jens Weidmann on Saturday.

Weidmann said that the euro zone is not in a deflationary cycle and that the ECB should not over-react to a slowdown in inflation caused largely by cyclical factors which should prove temporary.

Crude futures were off three-week highs following news Russia was withdrawing some troops on the Ukrainian border. U.S. crude futures stood at $101.41, off Friday's high of $102.24.

source: interaksyon.com

Asian shares tick up cautiously as China data looms

TOKYO - Asian shares cautiously rebounded from two-week lows on Thursday though investors were in no mood to embrace risk ahead of a batch of Chinese data that may offer clues about the extent of its economic slowdown.

A standoff in Ukraine, signs of weakness and other risks in China's economy and a massive fall in copper prices are spooking investors, though a flat close on Wall Street and some positive regional data helped to underpin some markets.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9 percent, recouping a large chunk of its losses the previous day, with Australian shares gaining on strong local employment data.

Japan's Nikkei rose 0.5 percent as Japanese machinery orders beat expectations, though the gain came only after a 2.6 percent drop the previous day, when both European shares and emerging market shares fell to one-month lows.

"What we're seeing today is a reaction to yesterday's sharp decline based on price (valuation) merits," said Hana Daetoo analyst Chang Hee-jong.

"But concerns about China remain the biggest issue for the market, and this will continue to affect markets throughout the first half of this year."

Copper - seen as a good gauge of global economic strength because of its extensive use - stabilized at $6,508 a tonne, keeping some distance from a four-year low at $6376.25 hit on Wednesday.

Still, after a drop of around 7 percent so far this month, investors are worried about a possible unraveling of Chinese loan deals using copper as collateral, which could add more pressure on copper prices.

On Wall Street, the S&P 500 reversed early losses and ended nearly flat, outperforming many others thanks in part to a string of positive data on the U.S. economy.

Investors will keep a close watch on Chinese data due at 0530 GMT, including urban investment, industrial output and retail sales, which will follow a disappointing series of February data in recent days.

"We expect modest downside surprises, which are likely to keep sentiment toward China somewhat negative," analysts at Barclays Capital said in a note.

The diplomatic stalemate between Russia and the West over Ukraine has also led investors to buy traditional safe haven assets.

Gold hit a six-month high of $1374.45.

U.S. Treasuries have erased all their losses after last week's strong payrolls data, with the benchmark 10-year yield at 2.74 percent versus its six-week high of 2.82 percent hit on Friday.

In the currency market, the Swiss franc was little changed after hitting a two-and-a-half year high of 0.8734 franc to the dollar, while the Japanese yen, which is under pressure from the Bank of Japan's easing, also ticked up slightly.

Going against the tide of risk-off trading, the New Zealand dollar hit a five-month high of $0.8527 after the country's central bank raised rates as expected and pointed to further tightening ahead to curb inflationary pressures.

The Australian dollar jumped 0.8 percent to $0.9062 after surprisingly strong local employment data.

U.S. crude futures traded near one-month lows hit on Wednesday after Washington announced a surprise plan for a test release of strategic oil reserves, trading at $98.12 per barrel, near Wednesday's low of $97.55.

But the European benchmark Brent held relatively firm at $108.26 as it drew support from the unfolding crisis over Ukraine.

source: interaksyon.com