Asian futures mostly higher amid Fed focus while copper retreats

[WELLINGTON] Stock-index futures signaled a quiet start to the week in Asia as investors awaited this week's Federal Reserve meeting, with traders and economists split on whether interest rates will be raised. Copper retreated following mixed Chinese economic data.

Following their best week since May, copper futures were down 0.3 per cent in early Monday trading with a Bloomberg gauge tracking Chinese gross domestic product at 6.64 per cent for August, barely changed from July and stuck below the government's 7 per cent target. Oil rallied following last week's losses and New Zealand stocks advanced.

"It's an important week for markets, with a real possibility that US policy rates might rise for the first time since 2006," Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd, said in an e-mail to clients.

"Investors are clearly skeptical, with the market pricing the odds of a liftoff at less than one-third. Analysts are effectively evenly split on the decision. We expect the FOMC to wait until December," he said, referring to the Fed Open Market Committee meeting on Sept 16-17.

The heightened volatility in financial markets since China unexpectedly devalued its currency has injected an element of uncertainty into the debate over whether the Fed will move to raise rates Sept 17, or wait until calm is restored. While some economists are advocating for a hike given improvement in the US labour market, traders are holding odds on a move at 28 per cent. China is also a factor, with data Sunday indicating weaker-than-expected factory output and the slowest pace of investment growth since 2000.

EARLY MOVERS

Standard & Poor's 500 Index futures added 0.1 per cent by 7.26am in Tokyo, after the index rose 0.5 per cent Friday, while New Zealand's S&P/NZX 50 Index, the first major gauge to start trading each day in the Asian region, climbed 0.1 per cent.

Futures on equity measures from Australia to Hong Kong gained in recent trading, while those on Japanese shares fell. Copper futures expiring in December on the Comex dropped to US$2.4470 a pound, after jumping 6.1 per cent last week, the most since May.

Futures on stock gauges across Asia rose with US equities late Friday. Contracts on Australia's S&P/ASX 200 Index added 0.5 per cent, while those on the Kospi index in Seoul were up 0.2 per cent. In Hong Kong, where shares pared weekly gains on Friday, futures on the Hang Seng Index climbed 0.4 per cent, and contracts on the Hang Seng China Enterprises Index, which tracks mainland stocks listed in the city, added 0.9 per cent.

Chinese index futures also indicated gains, with contracts on the FTSE China A50 Index up 0.9 per cent in most recent trading, and those on the CSI 300 Index gaining 0.2 per cent.

Ten-day volatility on the Shanghai Composite Index has retreated from the highest level in at least 10 years this month as regulators stepped up intervention in the market amid panic selling by investors. The stock gauge rose 1.3 per cent last week, its first five-day increase since mid-August, while the Enterprises index climbed 6 percent.

Futures on Japan's Nikkei 225 Stock Average were little changed at 18,090 for a second session in Chicago. Contracts in Osaka dropped 1 percent by 3 am on Saturday, to 17,990.

The yen, which typically moves at odds with Japanese equities, was steady at 120.54 per dollar following last week's 1.3 per cent drop, the steepest decline among major currencies.

Australia's dollar- regarded as a bellwether for Chinese sentiment given the two countries' close trading links - dropped 0.2 per cent at 70.79 US cents after climbing 2.7 per cent last week, its first weekly advance in more than a month. New Zealand's dollar was little changed at 63.18 US cents. The euro climbed 0.2 per cent to US$1.1356.

RETAIL SALES

A better-than-expected reading on Chinese retail sales helped mute the impact of the disappointing industrial output and fixed assets data, said BNZ's Shareef. Sales climbed 10.8 per cent in August from a year earlier, exceeding the 10.6 percent increase predicted by economists in a Bloomberg survey.

The yuan was little changed at 6.4105 per dollar in early Hong Kong trading, after jumping 0.9 per cent last week amid speculation China intervened in the market to prop up the offshore rate and align it more with the onshore one. The spread between the Hong Kong rate and the official one is now the smallest in nine months.

In the commodities market, West Texas Intermediate crude rose 0.6 per cent to US$44.91 a barrel. WTI sank 2.8 per cent on Friday, capping a weekly loss of 3.1 per cent amid ongoing concern over a glut in the commodity.

Goldman Sachs Group Inc helped stoke declines last session, with its analysts saying in a report that prices could slide to as low as US$20 a barrel as the global surplus is even bigger than they first estimated. Brent added 0.4 per cent on Monday to US$48.31, after sinking 3 per cent last week.

Gold for immediately delivery dropped 0.1 per cent to US$1,106.50 an ounce after capping a third straight week of losses. Futures on the precious metal slid to a one-month low on Friday as traders shied from making any significant moves before the Fed meeting.

The chance of a rate hike this week has suppressed gold, with higher borrowing costs dimming the metal's appeal given it doesn't offer returns like bonds or equities.

India reports on trade and wholesale prices, an inflation indicator, on Monday, while Australia will update on credit card purchases. Japan issues data on industrial production and Hong Kong reports on producer prices.

BLOOMBERG