Asian shares stepped back from two-month highs on Tuesday and commodity currencies retreated as a big fall in oil prices triggered profit-taking, although the fading expectation of an imminent U.S. rate hike lent a few support.
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China’s trade data for September showed a 3.7 per cent fall in exports from the same period a year ago, less than the 6.3 per cent drop forecast by economists in a Reuters poll. Yet rising hopes of more stimulus from China underpinned markets.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 1.0 percent from their two-month high touched on Monday.
Elsewhere in the region on Tuesday, the Philippine peso dropped 0.7 percent and the Thai baht fell 0.5 percent.
Crude-oil prices gained slightly in Asia trade Tuesday, mainly driven by bargain-hunting as analysts say the tepid rise in China’s crude-oil imports last month was uninspiring. November Brent crude LCOX5, +0.98% on London’s ICE Futures exchange rose $0.36 to $50.22 a barrel.
Official figures showed Chinese imports slumped almost 18 per cent year-on-year in September, underscoring worries about the world’s number two economy. China’s central bank expanded a scheme on Monday that increases banks’ ability to lend, boosting hopes of more measures to support the economy – lifting mainland Chinese shares to seven-week highs.
The FTSEuroFirst 300 index of leading European shares was down 1.4 per cent at 1,409 points, Germany’s DAX was down 1.5 per cent, France’s CAC 40 was down 1.9 per cent and Britain’s FTSE 100 was down 0.9 per cent.
Fed Governor Lael Brainard reinforced such expectations, saying late on Monday the Fed should hold off on any interest rate hike until it is clear that a global slowdown, difficulties in China, and other worldwide risks will not push the US recovery off course.
The widely-tracked VIX index, a volatility gauge of investor nervousness, was at its lowest since late August, a sign that optimism was returning to the markets after a tumultuous summer in which major indexes lost more than a quarter of their value. It last stood at 94.905.
The Australian dollar also tumbled 1.2 percent against the Japanese currency, to 87.31 yen.
Many emerging market currencies saw a few decent trade last week, with the ringitt and rupiah both having their best weekly performances in years.
China is a huge export market for Australia and the Australian dollar is used as a proxy for investments to China. Reduced expectations of a Fed rate hike dented the dollar.
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“Overnight we’ve seen the crude oil prices turning back”, said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “Investors are waiting on the sidelines to see what’s transpiring in the fundamental picture, but the fundamental picture hasn’t changed all that much in terms of slowing emerging-market growth”.
