Asia shares stumble, oil skids to 27-mth lows

Thursday, 9 October 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Asian share markets were mostly in the red on Wednesday as worries about waning global growth lifted safe-haven bonds, while shoving oil prices to their lowest in more than two years.

Extending a three-month-long decline, Brent oil sank $ 1.18 to $ 90.93 a barrel while US crude tumbled $ 1.07 to $ 87.78. The protracted slide should be a windfall for consumer spending power, but is also a powerful force for disinflation in much of the developed world. That has been a boon for sovereign bonds as investors wager the outlook for slowing inflation could put off the day when US interest rates might rise. Minutes of the Federal Reserve’s last policy meeting are due later in the session and markets will be acutely sensitive to how the debate between hawks and doves on the committee was playing out. In Asia, Japan’s Topix shed 1.1% while the Nikkei dropped 1.0%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1%, while Australia’s main index lost 0.9%. China’s markets bucked the trend as they returned from a week-long break, with Shanghai up 0.5%, though Hong Kong shed 0.7%. A private survey of China’s services sector showed growth eased a touch in September, but that only served to reinforce expectations of further stimulus measures by Beijing. Stimulus is also high on the agenda in Europe after German industrial output suffered the biggest decline since the height of the financial crisis, piling pressure on the European Central Bank to be more urgent in its actions. The IMF on Tuesday shaved its global growth forecast to 3.3% for this year, from 3.4%, warning of weakness in the euro zone, Japan and big emerging markets such as Brazil. “Weak numbers like the German production report fuel concern that ECB stimulus will be inadequate given the gloomier news,” said Westpac analyst James Shugg. “With the IMF waving its knife at its global growth forecasts, US markets couldn’t avoid the downdraft either.” The Dow fell 1.6%, while the S&P 500 lost 1.51% and the Nasdaq 1.56%. The pan-European FTSEurofirst 300 also shed 1.5%. The dollar index edged up to 85.860 on Wednesday, and back toward a four-year peak of 86.746 hit on Friday. The dollar crept up to 108.40 yen, having been as low as 107.75 at one stage. It touched a six-year high of 110.09 just a week ago. The euro hovered at $ 1.2635, after its bounce petered out around $ 1.2683.

Gold rises

Reuters: Gold extended gains to a third session on Wednesday as growing concerns over the global economy prompted safe-haven bids, while the return of top consumer China from a week-long holiday also lifted prices. Other safe-haven assets such as bonds and the Japanese yen also got a boost as Asian stocks fell and oil prices were mired near their lowest in more than two years. “For the moment, it does look like gold could see some more upside due to the risk averse sentiment,” said a precious metal trader in Hong Kong. “But I would still bet that prices would drop back to $ 1,180 than sustain these gains.” Spot gold rose further above the key level of $ 1,200 per ounce, gaining 0.5% to $ 1,214.20 an ounce by 0639 GMT. The metal dropped to $ 1,183.46 earlier in the week – its lowest since June 2013.