Asian stock futures foreshadow rout as Kiwi slips

by NZ Adviser18 Jan 2016
(Bloomberg) -- Asia braced for another risk-off day, with New Zealand’s dollar leading high-yielding currencies lower and index futures foreshadowing selloffs of at least 1.4 percent after U.S. stocks careened lower on Friday amid expectations for further hemorrhaging in crude oil prices.
The kiwi and Australia’s dollar slipped at least 0.2 percent, while the yen and the euro held gains as the worst start to a year on record for equities and oil’s tumble to a 12- year low fueled demand for safer assets. Shares in Wellington opened 1.8 percent lower, with futures on stock gauges from Japan to Hong Kong sliding after the Standard & Poor’s 500 Index sank 2.2 percent Friday. Both U.S. crude and Brent settled below $30 a barrel at the end of last week, with Nomura Holdings Inc. predicting a potential drop to $25 Monday as Iran pledges to immediately boost exports following the lifting of sanctions.
“China’s financial markets and global equities are likely to keep the risk-off sentiment alive this week,” Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand Ltd., said in a client note. “Commodities are likely to dominate today with oil breaking below $30 a barrel last week and news at the weekend that Iran has met conditions to lift sanctions, pushing more supply on to the market.”
Iran said it’s targeting an increase in shipments of 500,000 barrels a day amid the removal of sanctions capping crude sales, a move that would likely worsen a global glut that has spurred a 37 percent slide in oil over the past year. The slump in energy prices is fueling concern over disinflation, just as anxiety over China’s management of its slowing economy grips markets. The country reports on property prices Monday, ahead of a swathe of data Tuesday that includes an update of fourth-quarter gross domestic product.
The kiwi dollar retreated 0.6 percent to 64.27 U.S. cents as of 7:10 a.m. Tokyo time, extending last week’s 1.3 percent decline as the Aussie dropped 0.2 percent to 68.50 U.S. cents.
Both Australia and New Zealand count China as a key trading partner, and their currencies are among the worst performers this year amid the Asian economy’s chaotic approach to managing gyrations in its equity markets and the yuan. The Shanghai Composite Index entered a bear market last week, for the second time in seven months, erasing gains from state support efforts amid persistent investor concern over volatility. China’s stock- market watchdog has acknowledged ineptitude and loopholes within its regulatory system after a review of the turmoil that has rocked local markets since June.
Japan’s currency, the best performer among major counterparts this year, strengthened 0.1 percent to 116.92 per dollar, while the euro traded at $1.0918 after climbing 0.5 percent last session.
New Zealand’s S&P/NZX 50 Index, the first major stock gauge to start trading each day in the Asian region, fell to its lowest level since Dec. 15 following a 0.2 percent rebound last week. Futures on Australia’s S&P/ASX 200 Index were down 1.8 percent.
In Japan, Nikkei 225 Stock Average futures in Osaka retreated 2.7 percent early on Saturday, as the yen ended the Friday session up 0.9 percent. Yen-denominated futures traded in Chicago tumbled 4 percent to 16,795 at the end of the week.
Futures painted a similarly grim picture for Chinese equities, with contracts on the FTSE China A50 Index down 1.8 percent in most recent trading, amid a 5.3 percent slide in the biggest U.S. exchange-traded fund tracking Chinese shares on Friday. Hang Seng Index futures lost 1.8 percent with those on the Hang Seng China Enterprises Index, which tracks mainland stocks listed in Hong Kong. Futures on the Kospi index in South Korea slumped 1.4 percent.
The S&P 500 sank to 1,880.33 on Friday, led by technology shares and energy producers to its lowest level since August. The Dow Jones Industrial Average shed 391 points as the Nasdaq 100 Index slumped 3.1 percent.
Japan reports on industrial output Monday and central bank chief Haruhiko Kuroda is due to speak in Tokyo. Australia posts new car sales, while markets in the U.S. are closed for Martin Luther King Jr. Day.

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