Asia: Stock outlook clouded with silver in demand as crude falls

[WELLINGTON] Asian index futures signaled a retreat following declines in European shares as an element of concern crept back into trading after last week's post-Brexit decision rebound. US oil extended losses below US$49 a barrel.

Contracts on indexes from Japan to Hong Kong foreshadowed drops of at least 0.1 per cent, as precious metals - havens in times of market uncertainty - held onto gains. Silver extended its strongest surge since 2008, while gold was near a more than two-year high.

The yen was little changed for a second session, after rallying 0.7 per cent on Friday, and Australia's dollar held on to a two-day gain amid prospects political deadlock will spur the country's central bank to leave interest rates as is in a review on Tuesday.

Mounting speculation the UK's decision to leave the European Union will trigger further stimulus from Japan to Europe has both underpinned a recovery in risk assets and bolstered demand for precious metals and other raw materials which don't pay out on yields.

Odds of the Federal Reserve raising rates this year have slumped to 12 per cent, with the prospect of slowing global growth threatening its plan for two hikes in 2016. Economists project Australian policy makers will keep rates at a record low after the weekend election failed to produce a winner, raising the chance of a hung parliament.

"The market's love affair with yield and all-things-not-Europe remains supportive," David Croy, a senior rates strategist in Wellington at ANZ Bank New Zealand Ltd, said in a client note.

"But it doesn't alter the fact that caution on behalf of central banks, the forthcoming Brexit negotiations with the EU and the wave of elections in Europe next year have raised political risk in Europe."

Stocks

New Zealand's S&P/NZX 50 Index added 0.3 per cent as of 8:44am Tokyo time, extending gains into a seventh day, its longest rally since April. Futures on the S&P 500 Index rose 0.1 per cent from Friday levels, with markets in the US to resume Tuesday following the Independence Day holiday.

In Japan, contracts on the Nikkei 225 Stock Average were bid for 15,650 in the Osaka pre-market, from 15,760 on Monday. Singaporean-listed futures on the Japanese index dropped 0.5 per cent in most recent trading to 15,680, while Nikkei 225 contracts in Chicago were up 0.6 per cent from what they closed at on Friday, to 15,655.

Futures on Australia's S&P/ASX 200 Index dropped 0.3 per cent in recent trade, as those on the Kospi index in Seoul retreated 0.1 per cent. Futures on Hong Kong's Hang Seng and Hang Seng China Enterprises gauges slipped at least 0.4 per cent with contracts on the FTSE China A50 Index.

Australia also releases data on trade and retail sales Tuesday, while both Taiwan and the Philippines update on consumer prices. A slew of services purchasing managers' indexes is due, including the Caixin China services PMI. Markets in Indonesia are closed all week for the Eid al-Fitr holiday.

Currencies

The yen added less than 0.1 per cent to 102.54 per US dollar after closing down less than 0.1 per cent on Monday. The currency, which tends to move at odds with Asian shares, has gained more than 3 per cent since the UK referendum amid persistent, though not uniformly strong demand for haven assets.

The Aussie was little changed at 75.32 US cents after climbing 1.2 per cent over the past two sessions. All 27 economists surveyed by Bloomberg predict the Reserve Bank of Australia will keep its cash rate at 1.75 per cent Tuesday, with the results of the national election not expected to be known for at least a few days.

New Zealand's dollar dropped, halting a five-day advance, as investors increased bets that the country's central bank will reduce rates at their meeting next month.

BLOOMBERG