Asian stocks sag ahead of key economic indicators

Asian stocks sagged on Monday after Wall Street’s uninspiring performance on Friday and ahead of key economic indicators, while the dollar consolidated its gains against the yen and euro. Spreadbetters forecast shaky sentiment spilling over into European equities, predicting a lower open for Britain’s FTSE , Germany’s DAX and France’s CAC. MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed. Shanghai shares fell 0.2 per cent.

Financial markets in South Korea, Hong Kong and Taiwan were closed Monday for public holidays. Tokyo’s Nikkei lost 1.2 per cent on caution ahead of impending announcements including Wednesday’s Japan industrial production, Thursday’s China Caixin Purchasing Managers’ Index (PMI) and U.S. non-farm payrolls on Friday. “Investors would not take large positions until they digest the outcomes of these key data, so directionless trading is expected this week and volume is likely to be thin,” said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo. “If these data are better than expected, the market will likely start recovering next week.”

On Friday, the S&P 500 erased an early Federal Reserve-driven rally and closed slightly lower amid a selloff in biotech shares, and the Nasdaq lost 1 per cent. The Dow , however, managed to rise 0.7 percent. Fed Chair Janet Yellen last week revived prospects of an interest rate hike before year-end, easing concerns about slowing global growth that helped the dollar and risk assets, which have been buffeted by fears over China’s sputtering economy. Strong second quarter US GDP data released on Friday further sharpened the case for the Fed to raise rates in 2015.

Focus now turns to this Friday’s US non-farm payrolls as markets try to gauge whether labour market conditions are strong enough for the Fed to tighten monetary policy. The dollar fetched 120.30 yen after edging up to a two-week high of 121.24 on Friday as U.S. Treasury yields rose on the strong U.S. GDP numbers and expectations of a Fed hike in 2015. The euro was steady at $1.1184 after shedding 0.3 per cent overnight. Market activity is seen waning ahead of China’s week-long National Day holidays from Oct. 1. In commodities, the lacklustre mood in equity markets spilled over and US crude oil futures lost 0.8 per cent to $45.31 a barrel while Brent crude lost 0.6 per cent to $48.27 a barrel. Copper edged higher but was still stuck near one-month lows.

Three-month copper on the London Metal Exchange edged up 0.7 per cent to $5,058.00 a tonne. Prices hit four-week lows on Thursday near the $5,000-mark and are within reach of a six-year low of $4,855 seen last month. “The recoveries we’ve seen over the past couple of months, have been pretty short-lived,” said strategist Daniel Hynes of ANZ in Sydney. “It highlights the increasing cautiousness around China’s growth and what it means for copper despite what the supply side is doing. The PMI will be pretty key this week.”

Gold treaded water after being hit by a stronger dollar. Spot gold was little changed at $1,144.45 an ounce after dropping 0.7 per cent on Friday. Platinum, drubbed recently on fears demand for the metal used in catalytic converters would diminish in the wake of the Volkswagen emissions scandal, dipped 0.3 per cent to $941.00 an ounce, edging back towards the 6-1/2-year low of $924.50 an ounce plumbed last week.

Reuters