Asian futures point to more losses as gold to oil extend drops

[WELLINGTON] Asian index futures signaled losses with global stocks coming off their worst week this year amid a selloff in commodities and the rallying dollar. Crude oil and gold extended declines with copper.

Futures on equity gauges from Japan to Hong Kong dropped in most recent trading, with contracts on the Standard & Poor's 500 Index little changed by 8.55am in Tokyo following a slump in US stocks. American oil fell 0.1 per cent, with Brent hovering below US$55 a barrel. Gold slipped 0.2 per cent after its longest run of weekly losses since 2012. Copper futures lost 0.3 per cent. Australia's dollar lingered near a six-year low.

China reports on industrial company profits Monday, potentially providing further clues on an economic slowdown that has fueled the collapse in commodity prices. Gold is trading near a five-year low and oil is in a bear market amid concern raw-material supplies are outpacing demand.

In the US, data on durable and capital goods orders are due, with investors looking ahead to this week's meeting of the Federal Reserve to gauge the timeline for higher interest rates.

"These are tough times if you're a gold bug or an oil baron. The lead from Friday night is not one of optimism," Evan Lucas, a markets strategist in Melbourne at IG Ltd, wrote in an e-mail to clients. "In fact, the FOMC may even be a little more cautious about the current market and economic conditions. This would see a quick unwind in oversold markets," he said, referring to the Fed Open Market Committee, due to meet from Tuesday.

Disappointing reads on Chinese and European manufacturing Friday sparked renewed selling of commodity-linked currencies, with the Aussie returning to its weakest level since May 2009 and the Brazilian real tumbling 2.1 per cent to its lowest price since 2003. Canada's dollar was near its weakest since 2004.

OIL, GOLD

West Texas Intermediate crude fell to US$48.10 a barrel in early Monday trading, while Brent was little changed at US$54.64.

WTI retreated 5.4 per cent last week for a fourth straight period of losses. It is now down more than 20 per cent from its highest point this year, the common definition of a bear market. Gold for immediate delivery dropped to US$1,096.93 an ounce following last week's 3.1 per cent tumble.

The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, was little changed Monday after adding 0.1 per cent last week in its fifth straight weekly advance.

The yen, which typically moves at odds with Japanese shares, was little changed at 123.77 per dollar after a weekly gain of 0.2 per cent. Nikkei 225 Stock Average futures were bid for 20,370 in the Osaka pre-market, down from 20,520 on Friday, while contracts traded in Chicago were little changed at 20,375 following a 1 per cent slump last session.

CHINESE DECLINES

Futures on Hong Kong's Hang Seng Index slipped 0.7 per cent in most recent trading, with contracts on the Hang Seng China Enterprises Index, a gauge of mainland stocks listed in the city, down 1.1 per cent after losses in the gauge on Friday. Futures on the FTSE China A50 Index, which tracks the largest Chinese companies, lost 0.8 per cent and CSI 300 Index contracts declined 3 percent in Friday trade.

New Zealand's NZX 50 Index, the first major equity index to start trading each day in the Asian region, slipped 0.3 per cent, with futures on Korea's Kospi index down 0.5 per cent.

Contracts on Australia's S&P/ASX 200 Index - which slid 1.8 per cent last week amid losses of more than 3 per cent in mining and energy industry groups - declined 0.9 per cent.

Commodity stocks also drove the MSCI All-Country World Index's 2.1 per cent drop last week, the worst since mid-December. MSCI's Asia Pacific Index fell 1.5 per cent in the week, the weekly drop this month.

US TRADING

Crops, industrial metals and crude led the Bloomberg Commodity Index 1.2 percent lower on Friday, extending its more- than 13-year low. The S&P 500 sank 1.1 per cent, capping a weekly drop of 2.2 per cent, the most since March.

In the US on Friday, purchases of new homes unexpectedly retreated in June and prior readings were revised down, painting a picture of less robust improvement during the industry's busiest time of year.

Amid the disappointing economic data, investors sifted through corporate profit reports. The earnings season has so far been spotty for US companies, with sluggish demand overseas damping returns for multinational companies at the same time the dollar has strengthened to near the highest level since April.

'BIG COLLAPSE'

From Apple Inc to Caterpillar Inc and Microsoft Corp, a parade of blue chips have disappointed investors in the past two weeks. The impact is having the biggest impact on the Dow Jones Industrial Average, giving it the worst week since January. Analysts are calling for a 4 per cent drop in second-quarter profit for S&P 500 companies, shallower than July 10 estimates for a 6.4 per cent decline.

"Certainly the ongoing collapse in commodity prices emanating from weak data in China and weak earnings reports from companies because of China, such as Caterpillar, are weighing on the market," said Jim Paulsen, Minneapolis-based chief investment strategist at Wells Capital Management Inc. His firm oversees US$351 billion.

"We've got a pretty big collapse going on here." Bonds benefited, with yields on 10-year New Zealand government notes down a sixth straight day, declining three basis points to 3.30 percent, while Australian bonds due in a decade yielded 2.77 per cent, down five basis points. Similar maturity Treasuries capped a second consecutive weekly advance, with rates down eight basis points, or 0.08 percentage point, to 2.26 per cent in the week.

BLOOMBERG