Asian shares retreat as oil slips, Yuan pulls peers higher

Hong Kong and Indonesia led regional gainers in trade while Japan's markets are closed for a holiday. (Representative image) Photograph:( Reuters )

Reuters Hong Kong Aug 11, 2016, 04.31 AM (IST)
Asian shares fell on Thursday, reversing recent gains following losses on Wall Street, though regional currencies rose after Beijing let the Chinese yuan strengthen to mark the one-year anniversary of a landmark devaluation.

Broad risk sentiment remains on the back foot as oil prices tumbled on news of a surprising jump in US government stockpiles and as Singapore, the region's bellwether for trade, cut its economic forecast for the year.

"I still think the investors are trying to hang in there for the rally and while the general opinion seems to be that the Chinese authorities have steadied the ship, it is still a bit too early to draw that conclusion," said Cliff Tan, Bank of Tokyo-Mitsubishi UFJ's east Asia head of global markets research.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent. It hit a one-year high on Wednesday and has broadly outperformed the MSCI world index since end-June.

Hong Kong and Indonesia led regional gainers in trade. Japan's markets are closed for a holiday.

Singapore cut its economic growth forecast on concerns over Brexit and weakening global demand with official forecasts downgraded to an expansion of one to three per cent this year from a previous forecast of one to three per cent growth.

The surprising jump in US government oil stockpiles weighed on the S&P 500 and Dow Jones indices, which closed 0.29 per cent and 0.20 per cent down, respectively.

The energy sector was among the worst-performing of the 10 major S&P groups, falling 1.4 per cent after data from the US Energy Information Administration (EIA) showed US crude inventories rose 1.1 million barrels in the weekend of Aug. 5, a third consecutive weekly rise that surprised the market.

A weakening stock market and strong demand for government debt at bond auctions pushed yields down further.

The yield on the benchmark 10-year Treasury note extended a recent fall to 1.508 per cent while the yield on 10-year UK gilts tumbled to a record low of 0.52 per cent.

The fall in gilt yield came after the Bank of England said it would buy the 52 million pound (US$67.5 million) remainder of Tuesday's reverse auction shortfall in the second half of its bond-buying program.

In Asia, yields on 10-year benchmark New Zealand bonds fell to 2.18 per cent after the Reserve Bank of New Zealand cut its official cash rate by 25 basis points to a record low of two per cent as widely expected.

In currency markets, the dollar was broadly flat against a basket of currencies, nursing recent losses sustained in the wake of Friday's strong US jobs report.

The Chinese yuan led regional currencies higher after the People's Bank of China let the yuan appreciate slightly to mark the anniversary of the one-year devaluation.

It has weakened by more than 8 per cent since then, though some analysts say that weakness may be fading.

"There have emerged signs the yuan has stabilised somewhat recently as capital outflows have eased and the market has adjusted the expectations on Fed's rate hike process," said Zhou Hao, senior emerging market economist, Asia at Commerzbank AG.

More clarity about the US economy's health and the Federal Reserve's next move on interest rates could come with Friday's release of July retail sales and a speech by Fed Chair Janet Yellen later this month.

US West Texas Intermediate crude eased 0.7 per cent lower to $41.41 per barrel after sustaining sharp losses overnight. Brent crude fell 0.6 per cent to $43.77 per barrel.

Gold consolidated overnight gains to trade at $1,343.26 per ounce after posting overnight gains.