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Asia equities and commodities decline as risk appetite weakens - http://earlyretireonline.com | how to earn money fast

August 16, 2018 3:04 am
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Thursday 03.00 BST

What you need to know

  • Equities, commodities lose ground
  • Renminbi moves back from 19-month low
  • Currencies steadier as focus shifts from lira
  • Tencent slumps after earnings miss

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Equities and commodity prices continued to lose ground in early Asia-Pacific trading on Thursday after risk appetite weakened on Wednesday — in spite of a further recovery for the Turkish lira — amid mounting worries about Chinese growth and broad fears over emerging market currencies.

Turkey itself seems to have lost some fascination as investors await the next substantive development,” said Westpac senior currency strategist Sean Callow. “Moreover, commodity price weakness suggests there are broader issues to worry about beyond Turkey.”

On Wall Street overnight, the S&P 500 suffered its biggest one-day drop since late June, led by the energy and basic materials sectors and as dollar strength weighed on oil and metals prices.

The collapse in metals prices “ignited a wave of selling” across the commodity complex, ANZ analysts said, noting a 1.6 per cent fall for the bank’s China commodity index. “Precious metals also suffered as the selling became more indiscriminate,” they added.

Commodities

Several Chinese commodities prices fell on Thursday, with iron ore futures tumbling further from a recent peak amid fears about China’s growth.

Iron ore futures on the Dalian Commodity Exchange dropped 2.9 per cent, while coking coal, used in steelmaking, dropped 1.1 per cent.

On the Shanghai Futures Exchange, copper fell 2.3 per cent and thermal coal contracts listed on the Zhengzhou Commodity Exchange dropped 2.4 per cent.

The rough patch for commodities comes after data released on Tuesday showed growth in fixed asset investment falling to a record low as industrial production came in softer than expected and retail sales growth slowed during July.

Oil prices, however, were on a better footing on Thursday. Brent crude was up 0.4 per cent at $71.06 a barrel and West Texas Intermediate was flat at $65.03.

Forex and fixed income

Foreign exchange and sovereign debt markets were steadier after the wild swings earlier in the week.

The Australian dollar, which often serves as a proxy for sentiment on China’s economy, remained within striking distance of an 18-month low touched during the previous session, even after rising 0.4 per cent to $0.7258 on positive employment data.

The onshore renminbi exchange rate, which moves within a trading band of 2 per cent either side of a daily midpoint set by the People’s Bank of China, was 0.3 per cent firmer at Rmb6.9141, as it moved off a 19-month low hit a day earlier. The offshore renminbi, which is not limited by the band, was 0.4 per cent stronger at Rmb6.9199 to the dollar.

The yen initially firmed before slipping to be down 0.1 per cent at ¥110.80. The US dollar index, measuring the greenback against a basket of peers, was 0.1 per cent weaker.

Still, Société Générale analysts said in a research note that “it is difficult not to stay bullish” on the dollar “until the clouds over Turkey, China and broader [emerging markets] dissipate”.

In the sovereign debt markets, yield on US 10-year Treasuries, which rises when prices fall, was 1 basis point higher at 2.873 per cent. The yield on the 10-year Australian note was 3bp lower at 2.549 per cent and the Japanese equivalent was flat at 0.086 per cent.

Equities

Japan’s Topix dropped as much as 1.8 per cent, to its lowest since late March, with steep declines for the energy and basic materials segments, before the index started to edge higher to be down 0.4 per cent by late morning in Tokyo.

In Sydney, the S&P/ASX 200 was also in negative territory, down 0.2 per cent with the resources sector also the worst hit.

China-focused stocks were mixed with the CSI 300 index of major Shanghai and Shenzhen stocks down 0.5 per cent, but in Hong Kong the Hang Seng China Enterprises index gained 0.5 per cent.

The broader Hang Seng was off 0.2 per cent higher, though index heavyweight Tencent slumped 5 per cent to its lowest in nearly one year after reporting a rare drop in net profit as its gaming division faces bureaucratic headwinds in Beijing.

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