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Asian futures signal more pain as rout renewed amid oil pullback
[HONG KONG] The renewed selloff in global equities is showing no signs of abating, with Asian index futures foreshadowing more stock losses as concern over China's slowdown and its impact on the world economy intensifies.
New Zealand stocks kicked off Wednesday trading with a 1.4 per cent decline, following a worldwide snap back that sent a gauge of global shares down to where it was trading at a week ago. Oil maintained its reversal with ongoing concern over supplies whipsawing the market, while the worry over China manifested in more declines for copper futures and the Australian dollar.
"You have worries about the global growth outlook led by Chinese concerns at a time when the Fed is thinking about raising interest rates and that's leaving investors very twitchy," Shane Oliver, a global strategist at AMP Capital Investors Ltd. in Sydney, which oversees about US$114 billion, said by phone. "I think we've seen the worst but it's an environment where volatility is likely to continue." Data showing Chinese manufacturing at a three-year low reignited the rout Tuesday, with stock losses seeping from Asia into European markets and the US as weak Indian growth and slackening expansion at American factories fueling investors' concerns. China was said to have boosted measures aimed at shoring up the yuan as the country burns through foreign- currency reserves by supporting its volatile equity market.
Futures on the Standard & Poor's 500 Index were little changed by 8:42 am Tokyo time after contracts on gauges in Japan, Korea, Hong Kong and Australia fell at least 0.4 per cent in recent trading. US oil slumped another 3.1 per cent, bringing its two-day retreat to 11 per cent after futures entered a bull market on Monday. Futures on copper, a bellwether for China given the country's manufacturing profile, sank 0.4 per cent, while the Aussie fell to a fresh six-year low ahead of an update on gross domestic product.
Haven investments retreated a little following big gains on Tuesday, with the yen down 0.3 per cent to 119.70 per dollar after jumping 1.6 per cent last session. Gold was at US$1,139.08 an ounce after a three-day advance. The Chinese jitters fueled a rebound in Treasuries Tuesday, with 10-year yields down seven basis points, or 0.07 percentage point, to 2.15 per cent.
Nikkei 225 Stock Average futures were bid for 17,820 in the Osaka pre-market, down from 18,110 at their close in Japan Tuesday, while yen-denominated contracts traded in Chicago added 0.5 per cent to 17,880 following a 5.3 per cent tumble. Short selling in Tokyo is at the highest since Bloomberg began compiling data in 2008.
Futures on Australia's S&P/ASX 200 Index retreated 1.2 per cent as those on the Kospi index in Seoul dropped 1.1 per cent. Hang Seng Index futures in Hong Kong were down 0.7 per cent. Indonesian and Indian stock futures also retreated.
Chinese equities looked to be headed for another day of declines, with futures on the FTSE China A50 Index falling 1.5 per cent and contracts on the Shanghai Shenzhen CSI 300 Index down 1.9 per cent in recent trade. Futures on the Hang Seng China Enterprises Index, a gauge tracking mainland shares listed in Hong Kong, dropped 0.4 per cent.
The yuan added 0.1 per cent to 6.4164 per dollar in offshore trading, headed for a fifth day of gains. The People's Bank of China will impose a reserve requirement on entities trading in currency forwards for clients, according to six people familiar with the matter who declined to be named as they aren't authorised to speak on the issue. The change, to take effect Oct 15, mandates a deposit of 20 per cent of sales to be held at zero interest for a year, the people said.
Oil continued to drive declines among commodities, with West Texas Intermediate crude falling to US$43.95 a barrel after Tuesday's 7.7 per cent slide. The moves stalled oil's biggest three-day rally in 25 years, with data Wednesday forecast to show an increase in US crude stockpiles.
Energy analysts are predicting a 900,000-barrel jump in US supplies, with a gain of that size enough to keep inventories more than 90 million barrels above the five-year seasonal average. The American Petroleum Institute was said to report US crude supplies rose by 7.6 million barrels last week, tweets showed.
Japan updates on money supply Wednesday, while Indonesia reports on consumer confidence. Markets in Vietnam are closed for a holiday. A private report on US employment is due along with jobless claims and data on factory orders.
In the US, trading in equities has been volatile. Last week alone, the S&P 500 plunged the most since 2011 to enter a correction before rallying more than 6 percent over two days for its best back-to-back gains since the beginning of the bull market in 2009. Selling resumed Monday after Federal Reserve officials signaled they are preparing to raise rates as soon as this month.
The Chicago Board Options Volatility Index jumped 11 per cent Tuesday after posting its biggest monthly advance in data going back to 1990.
"The market is running around nervous, not sure what to pay attention to," said Robert Pavlik, who helps oversee US$9.1 billion as chief market strategist at Boston Private Wealth. "People are worried about China today but they're going from one issue to the next issue. The market's not necessarily trading on news. Everybody seems to be looking for an excuse." Fed Factor The Fed is scrutinizing data to determine the timing and pace of its first boost to borrowing costs since 2006. Attention will focus this week on the government's August jobs report, due Friday, as the last major data point before the Fed meets Sept 16-17.
Boston Fed President Eric Rosengren said Tuesday that uncertainty over inflation and global growth justifies a modest pace of rate increases, regardless of when the central bank begins tightening policy.
Futures traders are betting the Fed will push back liftoff to later this year. Odds of an increase in September have fallen to 32 per cent, down from 48 per cent two weeks ago, according to data compiled by Bloomberg. The chances assume that the federal funds rate will average 0.375 per cent after the first hike.
The International Monetary Fund on Tuesday joined private forecasters including Citigroup Inc and Morgan Stanley in anticipating slower global expansion as China's momentum falters and Brazil's economy shrinks.