Asian stocks fell amid oil’s descent as concern over China’s slowdown and waning commodities demand continued to dog markets. Emerging-market currencies rebounded versus the dollar as bets on a September rate hike crumple.
Indexes in Japan, Australia and Korea declined with U.S. oil extending losses at a six-year low following an unexpected uptick in American stockpiles. Malaysia’s ringgit rallied and the yen held gains against the greenback after minutes of the Federal Reserve’s July meeting signaled concern over lackluster price growth. Australian bonds tracked Treasuries higher.
“The Fed is lacking decisive reasons to raise rates,” Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo, said by phone. “Concerns about the global economy are a burden, and cheaper oil increases concerns about global growth.”
Odds on a September rate increase were further reduced Wednesday after Fed officials said while conditions for a hike were approaching, they needed more confidence inflation was shifting toward their goal. The meeting occurred before China’s yuan devaluation Aug. 11, which had already prompted some investors to scale back their rate bets. Concern China’s economy is slowing more than previously thought has battered emerging-market assets and commodities over the past month.
The MSCI Asia Pacific Index dropped 0.3 percent by 10:03 a.m. in Tokyo, with Japan’s Topix gauge, Australia’s S&P/ASX 200 Index and the Kospi index in Seoul falling at least 0.5 percent. Standard & Poor’s 500 Index futures added 0.1 percent after a 0.8 percent decline in the New York benchmark. U.S. oil fell a second day, while copper and crop futures rebounded. The ringgit climbed at least 0.2 percent with the Australian dollar.
Fed Musings
While indicating economic conditions were “approaching that point” where policy tightening could be warranted, Fed officials were silent on whether they should act in September, or wait until they have more evidence that inflation is accelerating, the minutes showed. The chance of an increase next month is now at 36 percent, according to Fed fund futures, down from around 50 percent earlier this month.
The Bloomberg Dollar Spot Index, a gauge of the U.S. currency against 10 major peers, fell 0.1 percent after slipping 0.3 percent Wednesday. U.S. consumer-prices data Wednesday cast doubt on how quickly inflation will return toward the Fed’s 2 percent target.
Bonds benefited from Fed’s caution, with Treasuries yielding 2.12 percent, down eight basis points from Tuesday. Rates on 10-year Australian and New Zealand bonds fell at least five basis points, or 0.05 percentage point.
IMF Vote
China’s yuan slipped 0.1 percent to 6.4488 per dollar in Hong Kong trading.
The International Monetary Fund pushed back until the end of September 2016 the date at which the yuan could be included in its special basket of reserve currencies. The IMF’s executive board voted Aug. 11 to extend the composition of the Special Drawing Rights for nine months, according to a statement out Wednesday.
West Texas Intermediate crude fell a second day, losing 0.3 percent to $40.68 a barrel following a 4.3 percent tumble on Wednesday, its steepest one-day retreat since July 6. Brent oil lost 0.2 percent to $47.08, extending its lowest settlement since January.
A surprise 2.62-million barrel increase in U.S. oil inventories fueled the losses, with analysts projecting an 820,000-barrel drop. Energy producers and mining companies led declines in the S&P 500, with both industry groups down at least 1.2 percent. Oil has fallen 30 percent from this year’s peak amid mounting concern over a global glut in the commodity.
Oil Hit
“What won’t be lost on investors is that U.S. oil prices have fallen nearly 16 percent since the July FOMC meeting,” Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd., said in a client note. “This will prove disinflationary.”
Gold held gains after the selloff in raw materials and emerging-market assets boosted demand for haven assets. The precious metal jumped 1.5 percent in the spot market Wednesday, and was little changed at $1,134.88 an ounce Thursday, close to its highest level in about a month. Gold futures for December delivery climbed another 0.6 percent.
Futures on the Hang Seng China Enterprises Index, which tracks mainland Chinese shares listed in Hong Kong, slid 1.7 percent in recent trading, following a 1.2 percent drop in the gauge last session. Contracts on the FTSE China A50 Index, which focuses on the mainland’s biggest companies, fell 0.8 percent, while futures on the Shanghai Shenzhen CSI 300 Index added 1.7 percent.
The Shanghai Composite Index ended Wednesday up 1.2 percent after earlier tumbling as much as 5.1 percent and sinking 6.2 percent on Tuesday. The MSCI Emerging Markets Index was down 0.1 percent early Thursday after sinking 0.9 percent last session to its lowest close since October 2011.