Asian shares edge down on US rate hike bets

Tuesday, 26 May 2015 02:32 - - {{hitsCtrl.values.hits}}

TOKYO, May 25 (Reuters) - Asian shares got off to a lackluster start on Monday, after rising inflation and a hawkish tone from the U.S. Federal Reserve Chair rekindled expectations that the Fed is on track to hike interest rates.

Activity was likely to be thin this session, as UK and U.S. markets are shut on Monday for the Spring Bank Holiday and Memorial Day respectively. European centers such as Germany will be observing the Whit Monday holiday.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down about 0.1% in early trade.

Japan’s Nikkei stock index added 0.3%, getting a tailwind from a weaker yen and trade data released before market open showed a better-than-expected rise in April exports.

U.S. shares fell and Treasury yields and the dollar rose on Friday, after the U.S. Labor Department’s ga BUP_DFT_DFT-21_02-IN-2 uge on core consumer goods prices rose by 0.3% last month, bringing the year-on-year rise to 1.8%, the highest since October.

“For the first time in nearly two months, investors began rewarding the dollar for good economic data rather than punishing it for weaker data,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note to clients.

In a speech to a business group in Providence, Rhode Island, Federal Reserve Chair Janet Yellen said she expected economic data to strengthen and noted that some of the U.S. economy’s weakness at the start of the year might be due to “statistical noise.”

But the yield on benchmark 10-year Treasuries came off its Friday highs as ongoing worries about Greece’s financial situation underpinned demand for safe-haven fixed income assets. It closed U.S. trade at 2.229%. U.S. Treasuries trading was closed on Monday for the U.S. holiday.

Greece cannot make debt repayments to the International Monetary Fund next month unless it manages to reach a deal with its lenders, its interior minister said on Sunday, in the most explicit remarks so far from Athens about the likelihood of default if talks fail.

That kept pressure on the euro, which was down about 0.2% at $1.0996, pushing to its lowest levels since late April.

The dollar was slightly higher against its Japanese counterpart at 121.56 yen, trading at its highest levels since mid-March.

Oil prices edge up on firm Asian, US demand

Reuters: Crude oil futures edged up on Monday, buoyed by healthy Asian appetite and demand from the US driving season.

Front-month Brent crude prices had gained 2 cents to $ 65.39 per barrel by 0312 GMT. US crude prices were up 14 cents at $ 59.86 a barrel.

“Global oil demand continues to surprise to the upside, with April data showing no signs of slowdown despite a pick-up in prices,” Energy Aspects said.

Japan’s customs-cleared crude oil imports rose 9.1% to 3.62 million barrels per day (17.28 million kilolitres) in April from the same month a year earlier, the Ministry of Finance said on Monday.

In China, crude imports hit a record 7.4 million barrels per day in April despite a slowing economy, driven largely by healthy car sales.

“We expect Chinese imports to be high in H2 15, potentially averaging 7.5 million barrels per day. This is due to the start-up of 39 mb (million barrels) of commercial storage, five SPR (strategic petroleum reserve) sites and linefill for Kunming refinery – buying for which is ongoing we believe, even though the refinery won’t start up till early 2016,” Energy Aspects said.

In the United States, the peak summer driving season officially starts with Memorial Day on Monday, and the American Automobile Association said road travel was expected to reach a 10-year high over the Memorial Day weekend, suggesting strong fuel consumption over the next three days.

In oil exporting Libya, warplanes from the official government attacked an oil tanker docked outside the city of Sirte on Sunday, wounding three people and setting the ship on fire, officials said.

It was the third confirmed strike by the internationally recognised government on oil tankers, part of a conflict between competing administrations and parliaments allied to armed factions fighting for control of the country four years after the ousting of Muammar Gaddafi.

Analysts said that steeper increases in oil prices were prevented by weak overall fundamentals.

“The overall fundamentals still point to a well-supplied market, a fact that should continue to put a ceiling on prices,” Barclays said.

Singapore-based Phillip Futures said that it expected WTI and Brent July 2015 contracts to remain above $ 58.49 and $ 64.35 respectively, provided oil fundamentals do not change.