Asian shares skid as Brent crude plumbs 12-year lows

14 Jan, 2016 12:44 pm

TOKYO – Asian shares buckled on Thursday in the wake of steep losses on Wall Street, as Brent crude oil skidded to 12-year lows amid a commodities rout that heightened fears about the global economy.

Global benchmark Brent LCOc1 tumbled 0.9 percent to $30.05, after marking a fresh 12-year low of $29.73.

US crude prices CLc1 last edged up 0.2 percent to $30.55 a barrel, but remained not far from Tuesday’s nadir of $29.93, which was their lowest level since December 2003.

“Perhaps $30 or just slightly below is acting as a little bit of a floor, but that being said that’s a straw in a hay barn in terms of positivity,” said Ben le Brun, market analyst at OptionsXpress in Sydney.

“The rest of the news is decidedly negative about oil,” he said.

London copper fell to its lowest since May 2009, compounding worries about the effect of China’s waning growth on demand for commodities. Copper CMCU3 was last down 0.4 percent at $4,375.50 a tonne after earlier dropping as low as $4,330.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS extended early losses and was down 2 percent.

China’s main stock indexes fell, with the Shanghai Composite Index .SSEC trading down 1 percent and the CSI300 index .CSI300 off 0.6 percent.

South Korea’s KOSPI .KS11 was down 1.5 percent, after the country’s central bank kept interest rates unchanged for a seventh straight month as expected. The Bank of Korea said it would monitor recent market turmoil sparked by developments in China as well as the effects of the US Federal Reserve’s December rate hike.

Japan’s Nikkei .N225 cratered 4 percent, as downbeat domestic data added to the gloom. The yield on the benchmark 10-year Japanese government bond JP10YTN=JBTC touched a fresh record low of 0.190 percent.

Japan’s core machinery orders fell 14.4 percent in November from the previous month, down for the first time in three months and marking a bigger decline than economists’ median estimate for a 7.9 percent drop.

“Investors are increasingly worried that the (US) market is not strong enough to withstand an initial view that the Fed would hike rates four times this year,” said Masashi Oda, senior investment officer at Sumitomo Mitsui Trust Bank.

Boston Fed President Eric Rosengren sounded a cautious tone overnight, saying global and US economic growth may be slipping and could force the Fed into a more gradual course of rate hikes than officials currently expect.

On Wednesday, better-than-expected China trade data lifted Asian sentiment and gave equities and commodities prices a much-needed boost. But those gains unravelled later in the global session, and major US stock indexes finished with sharp losses.

The benchmark 10-year US Treasury yield US10YT=RR plumbed its lowest levels since late October as investors sought safety in government debt. It stood at 2.068 percent in Asian trade, compared with its US close of 2.066 percent on Wednesday.

Undermined by lower US yields, the dollar lost ground to its perceived safe-haven Japanese counterpart. It was buying 117.42 JPY=, down about 0.2 percent. The euro edged up about 0.2 percent to $1.0892 EUR=.

Market participants continued to keep an eye on China’s yuan. It weakened even after the People’s Bank of China set its midpoint rate CNY=SAEC at 6.5616 per dollar prior to market open, firmer than the previous fix of 6.563. The PBOC has held the line on its currency in the past few days, calming some fears of a sustained depreciation. -Reuters

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