Asian markets cagey following Wall Street sell-off and oil glut
ASIAN markets fell yesterday as uncertainty over the future of central bank monetary policy weighed on buying interest while warnings of an extended oil glut sank energy firms.
The region’s traders were given a rocky lead from Wall Street where all three main indexes ended more than 1 percent lower after a plunge in crude prices shredded nerves.
Investors are trying to understand a slew of contradictory signals from authorities around the world, with the Federal Reserve and Bank of Japan preparing to hold crucial policy meetings next week.
The gatherings come at a time of increasing anxiety that central bankers are considering winding back on years of cheap cash that have helped fuel a rally in global equities.
While the Fed is considering an interest rate hike, which some say could come this month, the Bank of Japan has been reticent in providing concrete promises of any new stimulus, despite weak growth at home.
“Investors are waking up to the fact that valuations are high and these record-low interest rates won’t be with us forever,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, told Bloomberg News.
“There’s a lot of event risk coming up with the US election, several central bank meetings and oil prices are still looking shaky. Markets had become dangerously reliant on central bank support and this is a wake-up call that it won’t always be the case.”
However, while there are concerns about monetary policy, a report in the respected Nikkei business daily said BoJ policymakers were considering cutting borrowing costs further into negative territory, sending banking shares tumbling in Tokyo.
The city’s Nikkei index ended 0.7pc lower.
Shanghai fell 0.7pc and Singapore shed 0.5p. Wellington, Manila and Jakarta also retreated.
Hong Kong shifted in and out of negative territory through the day and ended down 0.1pc, though Sydney added 0.4pc.
Energy shares were among the big losers as oil prices tumbled after the International Energy Agency (IEA) said global demand was slowing, pointing to weak consumption in China and India.
The commodity edged up slightly in Asian trade. West Texas Intermediate rose 37 cents to $45.27 and Brent added 31 cents to $47.41, partially reversing big falls the previous day.
Prices are also being pressured by traders’ lack of conviction that any deal will emerge from a closely watched meeting between OPEC and Russia next week aimed at addressing the global glut that has hammered prices for two years. –