Asia: Stocks set for more declines amid oil drop, yen holds jump

[WELLINGTON] Japanese index futures signaled losses and Australian stocks fell as renewed concern over the state of the global economy revived demand for haven assets and weighed on commodity prices.

Futures on stock gauges from Japan to Hong Kong foreshadowed more declines as energy and raw-materials shares drove a second day of losses in Sydney. Copper futures extended their drop in the wake of an industrial-metals selloff, while US crude oil fell toward US$36 a barrel as the Australian dollar maintained last session's weakness.

The yen held below 113 per US dollar following two days of gains as Australian and New Zealand government debt tracked last session's advance in Treasuries and Japanese bonds.

After a three-week rally that has restored almost US$5 trillion to the value of global equities, a sense of uncertainty seems to be returning to markets in the wake of new data reinforcing Japan's economic woes and a sustained drop-off in trade for China. That concern may raise the stakes as investors await a monetary policy review from the European Central Bank on Thursday, with meetings of the Bank of Japan and Federal Reserve due the following week. A majority of economists polled by Bloomberg see China's stock losses shaving as much as 0.3 percentage point off economic growth.

"As much as I would like to agree with the positive sentiment, several key macro headwinds remain on point and the drivers of the past week are now showing signs of topping out," Evan Lucas, a markets strategist in Melbourne at IG Ltd., said in an e-mail to clients.

"Markets will remain volatile and trade in a direction-less manner."

After reporting a contraction in fourth-quarter gross domestic product last session, Japan updates money stock and machine tool orders Wednesday, while Australia reports on home loans and investment lending.

China's National People's Congress continues, while Malaysia is projected to keep its benchmark interest rate on hold at 3.25 per cent. Indonesian markets are closed for a holiday.

Stocks Australia's S&P/ASX 200 Index dropped 0.1 per cent as of 8:51 am Tokyo time after the Bloomberg Commodity Index fell 1.1 per cent on Tuesday, halting its own six-day advance.

Price for iron ore, Australia's biggest export earner, retreated 0.2 per cent last session following a record, 19 per cent surge on Monday. New Zealand's S&P/NZX 50 Index fell 0.1 per cent, snapping a seven-day rally, its longest climb this year.

In Japan, Nikkei 225 Stock Average futures were bid for 16,710 in the Osaka pre-market, down from 16,800 at their close, while Singapore-traded contracts slipped 0.5 per cent to 16,715. Kospi index futures in Seoul were up 0.1 per cent in most recent trading.

Futures on Hong Kong's Hang Seng and Hang Seng China Enterprises indexes fell 0.2 per cent, while those on the FTSE China A50 Index were little changed.

The steepest drop in Chinese exports since 2009 sent the biggest US exchange-traded fund tracking Chinese equities down 1.5 per cent in a second day of declines. The Shanghai Composite Index ended Tuesday up 0.1 per cent, after falling as much as 3.3 per cent.

Futures on the Standard & Poor's 500 Index added 0.1 per cent Wednesday with contracts on the Dow Jones Industrial Average.

The S&P 500fell 1.1 per cent last session from its highest level since Jan 5, led lower by losses of at least 2 per cent in raw-materials producers and energy stocks.

US crude dropped for the first time in three days on Tuesday, losing 3.7 per cent to US$36.50 a barrel from a two-month high amid concern data this week will show another increase in American inventories.

BLOOMBERG