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Asia: Shares sag on caution, dollar consolidates
[TOKYO] Asian stocks sagged on Monday after Wall Street's uninspiring Friday performance and ahead of key economic indicators, while the dollar consolidated its gains against the yen and euro.
MSCI's broadest index of Asia-Pacific shares outside Japan stood virtually flat. Shanghai shares fell 0.3 per cent. Financial markets in South Korea, Hong Kong and Taiwan were closed Monday for public holidays.
Tokyo's Nikkei lost 1.1 per cent on caution ahead of coming announcements including Tuesday's Japan industrial production, Thursday's China Caixin Purchasing Managers' Index (PMI) and US non-farm payrolls on Friday. "Investors would not take large positions until they digest the outcomes of these key data, so directionless trading is expected this week and volume is likely to be thin," said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo. "If these data are better than expected, the market will likely start recovering next week." On Friday, the S&P 500 erased an early Federal Reserve-driven rally and closed slightly lower amid a selloff in biotech shares, and the Nasdaq lost 1 per cent. The Dow, however, managed to rise 0.7 per cent.
Fed Chair Janet Yellen on Thursday revived prospects of an interest rate hike before year-end, easing concerns about slowing global growth that helped the dollar and risk assets, which have been buffeted by fears over China's sputtering economy.
Strong second quarter US GDP data released on Friday further sharpened the case for the Fed to raise rates in 2015.
Focus now turns to this Friday's US non-farm payrolls as the markets try to gauge whether labour market conditions are strong enough for the Fed to tighten monetary policy.
The dollar was little changed at 120.48 yen after edging up to a two-week high of 121.24 on Friday as US Treasury yields rose on the strong US GDP numbers and expectations of a Fed hike in 2015.
The euro was also steady, at US$1.1187 after shedding 0.3 per cent overnight. "In terms of price action, we uphold our view of further dollar outperformance versus the emerging market currencies as risk premia remains elevated on China growth, outflows, and policy opacity concerns," wrote strategists at Barclays. "Compared with developed countries, we expect the dollar to appreciate particularly vis-a-vis the euro, as we think the European Central Bank will have to ease monetary conditions at some point before year-end in order to meet its inflation target." In commodities, the lacklustre mood in equity markets spilled over and US crude oil futures lost 0.6 per cent to US$45.42 a barrel while Brent crude lost 0.9 per cent to US$48.15 a barrel.
Copper edged higher but were still stuck near one-month lows. Three-month copper on the London Metal Exchange had edged up 0.4 per cent to US$5,044.50 a tonne. Prices hit four-week lows on Thursday near the US$5,000-mark and are within reach of a six-year low of US$4,855 reached last month. "The recoveries we've seen over the past couple of months, have been pretty short-lived," said strategist Daniel Hynes of ANZ in Sydney. "It highlights the increasing cautiousness around China's growth and what it means for copper despite what the supply side is doing. The PMI will be pretty key this week." Gold treaded water after being hit by a stronger dollar. Spot gold was little changed at US$1,146.70 an ounce after dropping 0.7 per cent on Friday.
Platinum, drubbed recently on fears demand for the metal used in diesel engines would diminish in the wake of the Volkswagen emissions scandal, dipped 0.1 per cent to US$942.25 an ounce, edging back towards the 6-1/2-year low of US$924.50 an ounce plumbed last week.