Asian markets struggle as oil resumes losses
MOST Asian markets slipped yesterday as traders trod water ahead of a key speech by Federal Reserve boss Janet Yellen this week, while oil suffered fresh losses on glut worries.
With speculation growing that US interest rates could rise by the end of the year, Ms Yellen’s comments at a global central bankers meeting in Jackson Hole tomorrow will be scoured for forward guidance on US central bank policy.
There is a chance borrowing costs could rise as soon as next month, analysts say, but most bets are on a move just before the end of the year, or in February.
“While recent US data has been mixed, the base case for the Fed is probably to increase rates in the absence of any compelling reason not to,” Michael McCarthy, chief market strategist in Sydney at CMC Markets, told Bloomberg News.
“The Fed is aware that there’s a substantial risk that if economic conditions deteriorate, they have very little room to move. Given this, the central bank wants to normalise rates as soon as they can.”
The dollar rose against most other currencies, hitting 100.30 yen from 100.23 yen in New York, while the euro eased to US$1.1295 from $1.1307. The greenback was also sharply up against high-yielding units including the Australian dollar, the South Korean won and the Indonesian rupiah.
On equity markets Tokyo ended 0.6 percent higher and Sydney edged up 0.1pc.
But most other markets were lower. Hong Kong lost 0.8pc and Shanghai ended 0.1pc lower, while Seoul shed 0.3pc. There were also losses in Manila and Jakarta.
In early European trade London and Frankfurt lost 0.6pc while Paris shed 0.7pc.
Oil traders were also in retreat, hit by data from industry group the American Petroleum Institute showing a surge in stockpiles.
West Texas Intermediate slipped 1.6pc to $47.35 and Brent was off 1.3pc at $49.33.
The losses more than wiped out the August 23 gains that were fuelled by a report saying Iran could support efforts by OPEC and Russia to limit crude output, having previously said it was against the idea.
The commodity plunged on August 22 after Iraq said it plans to boost production, while a rebel group in Nigeria called a ceasefire after months of attacking oil installations in the country.
But Stephen Innes of OANDA said, “With Jackson Hole and monetary policy in both Japan and US taking centre stage we expect limited follow-through, but traders will keep an eye out for an escalation of political tension.” –