Asian shares wilt, take cue from Wall Street

Asian shares fell on Thursday following a dismal day on Wall Street, while the dollar took a breather from this week’s rebound and crude oil gave back some of its recent gains. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 per cent, moving back toward a two-month low touched on Tuesday, after US share markets suffered their worst day since February following downbeat quarterly retail reports.

All of the 10 major S&P 500 sectors fell except for utilities, which gained 0.24 per cent. Japan’s Nikkei stock index skidded 0.2 per cent, falling for the first time in four days as investors digested dismal company earnings forecasts following a period of sustained yen strength, which cuts deeply into exporters’ profit outlooks.

"We're beginning to see that guidance from exporters have been on many occasions quite shocking, forecasting in some cases declines in profit of 20 to 50 per cent in the coming year," said Stefan Worrall, director of Japan equity sales at Credit Suisse.

Crude oil futures were off lows but still down in Asian trading, after getting a lift overnight when the US government unexpectedly said crude inventories fell for the first time since March. US crude slipped 0.4 per cent to $46.05 per barrel after adding 3.5 per cent on Wednesday. Brent crude shed 0.4 per cent to $47.42 after settling up 4.6 per cent overnight and gaining 4.3 per cent in the previous session.

"At this point, investors see oil extending its rally as a sign of improvement in global growth," said Jennifer Vail, head of fixed-income research at US Bank Wealth Management in Portland, Oregon. But the weak retail reports offset any lift in sentiment, she said. In light of the murky economic outlook, US Federal Reserve policymakers remain concerned about whether the market could stomach another interest rate hike.

“They (the Fed) really want to raise the policy rate so that they have some flexibility should the domestic economy need it, but given this highly unusual slow-growth environment, it’s been difficult for there to be clear signals that it can digest policy normalisation,” Vail said.

Wall Street’s top banks now see the US central bank’s next hike coming in September, according to a Reuters survey conducted on Friday after a weaker-than-expected rise in US payrolls.

Later on Thursday, the Bank of England is expected to say that its nine Monetary Policy Committee members voted to keep rates on hold at a record low of 0.5 per cent, where they have remained for more than seven years. BOE Governor Mark Carney will tread carefully back into Britain's debate on whether to leave the European Union, when he sets out the central bank's latest forecasts.

The dollar index, which tracks the greenback against a basket of six other currencies, edged up 0.1 per cent to 93.882, but remained shy of a two-week high of 94.356 set on Wednesday after investors took profits on the US currency’s recent gains. The euro was steady at $1.1423, while the dollar added 0.3 per cent to 108.67 yen. It had notched a two-week high of 109.37 yen on Wednesday.

Reuters