Asian markets continued on a downtrend as the investors preferred sidelines. Japanese shares led the losses in the region due to disappointment over stimulus package. Aussie markets also slipped on yesterday’s monetary policy cut.
Oil prices continued to fluctuate during Asian trading hours as market bulls found support from weak buildup of crude stockpile in the world’s biggest consumer. WTI futures with September delivery was at $39.63 per barrel, up 0.30%, while global trademark Brent with October delivery traded at $41.80 per barrel, up 0.20%, as of 9:12 AM EDT. The energy play was mixed in the region despite weak oil prices.
Late yesterday, American Petroleum Institute (API) supported the market bulls by reporting 1.3 million barrels decline in the US crude stockpile for the week ended July 29. Gasoline inventory also fell by 450,000 barrels, API reported.
Later today, markets await the US official inventory data by Energy Information Administration (EIA). Analysts anticipate a decline of 900,000 barrels of crude on average. Traders seem hesitant ahead of inventory report and hence have taken sidelines. Despite the anticipation of fall in the US crude inventory, market has lost stream as pace of decline would not match the rate of production. API figures signaled an overall weak impression that decline would not be big enough diverting prices on a bullish path.
Overnight, the US futures settled below $40 a barrel for the first time since April due to weak market fundamentals. The oil market has been under supply glut over the past two years amid market share war.
However, the unexpected supply cut from Canada and Nigeria added to the hopes that market would soon attain balance. The hopes turned the market bullish and supported oil prices to cross psychological level of $50 a barrel.
However, now the market has once again turned bearish as the supply glut concerns took market by storm, pushing oil prices down. Some analysts have also scaled back their oil forecast below $35 a barrel for the fourth quarter of the year (4QFY16). Hedge fund managers have also liquidated their long position due to the bearish outlook.
During Asian trading hours, traders also remained at sidelines and waited for inventory data, which may drive sentiments among them. Some analysts believe that the rebalancing pace is slow and only strong bullish factors would only able to drive prices higher in future.
The US currency has been under depreciation pressure due to weak economic fundamentals. However, Bloomberg dollar spot index is trading up 0.20% at 95.258, as of 9:03 AM EDT.
Overnight, the dollar struggled to maintain ground but lost momentum later and hit six-week lows on fading hopes of rate in the world’s biggest economy. The dollar’s softness came following the lack luster’s inflation figure on which investors shifted their focus despite the upbeat consumer spending data.
The weak inflation data weighed on the hopes of a rate hike in September as it would be unjustifiable to increase the rate. Analysts believe that dollar is in correction phase as it went through bullish stance on the expectation of rate hike by Fed. However, it would not fall further from current level unless major economic event takes place, analysts said.
Japanese equity markets have been under selling pressure in the past two sessions as investors disappointed with government’s stimulus package. Nikkei 225 dropped 308 points on the back of downward pressure in financials and technology sector, pushing index 1.88% lower at the close of trade, taking biggest hit in the region.
In the currency market, yen continued to gain strengthen on stimulus disappointment. The dollar-yen pair was trading at 101.16, as of 9:17 AM EDT. On the back of stronger yen, major exporters finished lower with Toyota Motor Corp and Sony Corp shares falling 1.88% and 1.66%, respectively. However, Honda Motor Co Ltd surged 3.82% despite rising currency.
Energy sector traded up 2% despite weak oil prices with Showa Shell Sekiyu KK soaring 3.76%, while Inpex Corp was down 0.27%.
Mainland shares extended yesterday’s gains despite investors seemed hesitant to participate in trading. Shanghai stock exchange composite added 7 points at the close trade after oscillating between gains and losses. The index finished up 0.24%, accredited to the a rally in consumer discretionary and materials sector. CSI 300, China’s blue chip index, also closed up 0.14%, adding 4 points.
In the currency market, People’s Bank of China strengthened the daily reference rate — the most since June 23 to 6.6195 a dollar, reflecting a boost of 0.39%. Currency experts believe that China will likely to keep yuan stable ahead of its inclusion IMF basket of currencies.
Earlier today, researchers at the National Development and Reform Commission (NDRC) said monetary policy should be eased further, according to an official statement. The commission believed that the cut in policy rates would help to boost investment and reduce borrowing costs. However, it did not signal any specific period for action and said that benchmark rates should be reduced at an appropriate time.
It was quite unusual, as generally, NDRC neither comments on monetary policy publicly nor has the power to set one. This has also triggered speculation in the market that the central bank may ease interest rates in the economy in the near future.
PetroChina Company Limited and China Petroleum & Chemical Corp shares fell 0.28% and 0.21%, while Sinopec Oilfield Service Corp surged 1.56%, sending energy sector down 0.29%.
The stock markets in the country remained under pressure, extending yesterday’s losses. This move came in as investors adopted a cautious stance, following the ease in monetary policy on Tuesday. S&P/ASX 200 dropped 75 points on the back of selling pressure in heavily weighted financials and utility sector, pushing index 1.35% lower.
Miners also traded under pressure as BHP Billiton Limited finished 0.78% lower, while Rio Tinto Limited closed flat. Energy sector finished down 0.58% as Santos Ltd traded 1.65% higher, while Woodside Petroleum Limited shares closed flat.
Today, Hang Seng fell after yesterday’s closing price due to typhoon warning issued by the Hong Kong Observatory. The index slipped on a retreat in the property sector, shedding 390 points to finish 1.76% lower. Selling pressure in consumer discretionary and energy sector also weighed on the index.
Among oil shares, Cnooc Ltd was down 4.43%, while PetroChina Company Limited dropped 1.88%, sending energy sector 2.74% lower.
Overnight, investors at the US stock markets remained at sidelines due to weak economic outlook. NASDAQ led the losses and fell 0.90%, followed by S&P 500and Dow Jones Industrial Average, which slipped 0.64% and 0.49%, respectively. A weak finish at Wall Street also dragged down the investors’ confidence in the region.