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Asian futures point to more stock losses before China factory PMI
[WELLINGTON] Asian stocks were poised to extend the global equity selloff, with index futures from Australia to the US sliding as the anxiety that marked last month's market turmoil returns.
Futures on Asian benchmarks slid at least 1 per cent in recent trading, after commodity producers and car stocks drove the Standard & Poor's 500 Index down 1.2 per cent to an almost two-week low.
Demand for the safest investments continued on Wednesday, with Australian and New Zealand bonds tracking a rebound in Treasuries and the yen holding gains. Copper futures hovered near their lowest price this month with a private gauge projected to show a seventh straight month of contraction in China's manufacturing sector.
Renewed concern over China's faltering economy, the source of last month's market ructions, sank commodities on Tuesday, with equity volatility spiking from the US to Europe as the scandal over car emissions standards engulfing Volkswagen AG also frayed nerves.
Markets have been swinging since the Federal Reserve stood pat on interest rates last week, as officials proclaiming the strength of the US economy and prospects for a hike this year muddy the waters. Japanese markets remain closed for holidays Wednesday.
"There wasn't much data out overnight but the focal point was the unfolding scandal at Volkswagen," Con Williams, a rural economist in Wellington at ANZ Bank New Zealand Ltd, said in a client note. "This, alongside renewed commodity price weakness, led to risk-off moves in markets. Concerns over China remain."
S&P 500 futures dropped 0.3 per cent by 7.43am in Tokyo, with New Zealand's S&P/NZX 50 Index, the first major stock gauge to start trading each day in the Asian region, down 0.2 per cent in its first hour. Yields on 10-year Australian debt fell six basis points to 2.69 per cent after a seven basis-point drop in rates on similar maturity Treasuries, while the yen added 0.1 per cent to 120.06 per dollar following Tuesday's 0.3 per cent climb. Copper futures were steady after sinking as much as 4.3 per cent last session, while US crude oil traded at US$46.60 a barrel after seesawing the past two days.
The Chicago Board Options Volatility Index, or VIX, jumped 11 per cent in New York for its biggest gain since Aug 24 on a closing basis, while Europe's volatility gauge surged 19 per cent.
"When you see a rise in volatility it leads to investor uncertainty and any bad news has the opportunity to shake things up," Joseph Betlej, who helps oversee US$33 billion as vice-president of Advantus Capital Management, said by phone. "People are questioning the strength of growth in the domestic economy and second guessing that the Fed must see something."
Despite the yen's strength, the Bloomberg Dollar Spot Index was headed for a fourth straight day of gains, adding 0.1 per cent after jumping 0.4 per cent on Tuesday. The gauge, which tracks the greenback against 10 major peers, has gained 1 per cent since the Fed held rates last Thursday.