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Most Asia markets up but warning of further volatility

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[HONG KONG] Most major Asian markets rose on Thursday following the week's sharp losses but traders are struggling to get a firm footing in a volatile February, spooked by heavy selling and warnings of more upheaval to come.

After a run of almost uninterrupted gains across the globe fuelled by cheap money and optimism about the economy, traders are having to navigate turbulent waters as central banks - led by the Federal Reserve - look to lift borrowing costs.

Last Friday's strong US jobs and wage growth data, coupled with rising yields on key US Treasury bills, brought an end to the record-setting global rally, sending Wall Street spiralling down before slamming world markets this week.

Asia took the biggest hit on Tuesday, with Hong Kong and Tokyo among the worst affected but others also felt the pinch.

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And investors have been unable to steady the ship with a rebound on Wednesday running out of steam.

On Thursday there were more swings, though most markets stayed in the green.

Tokyo ended 1.1 per cent higher while Hong Kong was 0.4 per cent up having fallen around eight per cent over the previous five sessions.

Sydney was 0.2 per cent higher while Seoul and Singapore each gained 0.5 per cent. Kuala Lumpur and Bangkok also advanced.

However, Shanghai tumbled 1.4 per cent despite data showing Chinese imports smashed expectations and exports were supported by strong global demand.

Wellington, Taipei, Manila and Mumbai all fell.

Wall Street's three main indexes sank into the red, while in early European trade markets that saw strong gains on Wednesday reversed at the open. London fell 0.8 per cent, Paris slipped 0.5 per cent and Frankfurt lost 0.7 per cent.

"There are a lot of risks ahead and we've been lulled into a false sense of security over the last couple of years with central banks keeping rates low for a very long time," Steve Goldman, Kapstream Capital head and portfolio manager, told Bloomberg TV.

"Risk assets are going to continue to perform well albeit with a lot more volatility than what we've seen in the past." Expectations the Fed will hike interest rates more than the three times expected this year have lifted the dollar against high-yielding currencies including the Australian dollar, South Korean won, Indonesian rupiah and South African rand.

However, with the European Central Bank tipped to be close to winding in its crisis-era stimulus, the euro has strengthened, while the pound is also being supported by hopes for a positive outcome for Britain's exit from the EU.

The greenback also climbed against the yen, which is considered a safe bet in times of uncertainty, having seen a sharp fall earlier in the day.

Oil prices extended Wednesday's sharp sell-off on concerns about increasing US production, offsetting an output cap by Opec and Russia.

The US dollar's strength against high-yielding units was also putting a dampener on the oil market as it makes the commodity more expensive for clients using those currencies.

"It's the deluge US production that remains the most significant menace to Opec production cuts. The bottom line is the US crude production should keep hitting new highs throughout 2018," said Stephen Innes, head of Asia-Pacific trading at OANDA.

The drop in crude prices again hit energy firms, with CNOOC, PetroChina and SinOpec diving in Hong Kong, and Woodside Petroleum sharply lower in Tokyo.

REUTERS

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