Asian stocks extend declines after China rout, Aussie dollar rebounds

A currency dealer monitors exchange rates in a trading room at the Korea Exchange Bank in Seoul on July 6, 2015.
A currency dealer monitors exchange rates in a trading room at the Korea Exchange Bank in Seoul on July 6, 2015.PHOTO: AFP

SYDNEY (BLOOMBERG) - Asian stocks retreated for a fifth day after a rout in China drove global shares lower. Oil declined, while the Australian and New Zealand dollars rebounded from near six-year lows.

Japan's Topix index slid 1.3 per cent by 9:55 a.m. in Tokyo as South Korea's benchmark gauge lost 0.9 per cent. Futures on the Standard & Poor's 500 Index were little changed after the measure capped its longest losing streak since January. Crude dropped 0.6 per cent and the Aussie dollar rose 0.2 per cent while copper futures snapped a seven-day losing streak.

The benchmark Shanghai Composite Index plunged the most in eight years Monday, intensifying concern government efforts to prop up shares are unsustainable. The turmoil - the worst of which came after markets in Tokyo and Seoul closed - bolstered speculation the Federal Reserve will keep interest rates lower for longer. The UK reports on economic growth Tuesday, while measures of US house prices and consumer confidence are due.

"Extreme caution is needed here," said Matthew Sherwood, Sydney-based head of investment strategy at Perpetual Ltd., which manages A$33 billion.

"The return of market volatility in China will be a significant discussion point at the US Fed. in terms of what this is telling us about the Chinese economy. There is a lot of global weakness and significant external risk."

The Bloomberg Dollar Spot Index was little changed at 1,204.13 after sliding 0.4 per cent the previous session. Australia's dollar bought 72.83 US cents. It touched 72.60 on July 24, the weakest since 2009. New Zealand's currency also strengthened Tuesday, trading 0.5 per cent higher.

The Standard & Poor's 500 Index declined 0.6 per cent at the close in New York on Monday, falling for a fifth day. European stocks fell 2.2 per cent and emerging-market shares lost 2 per cent. That followed an 8.5 per cent slide in the Shanghai Composite as Chinese industrial company profits shrank in June.

Stocks with heavy exposure to China slumped in New York trading. Apple slipped 1.4 per cent, after its worst week in six months. Alibaba Group Holding retreated 2 per cent. Baidu, China's largest search engine, lost 4.2 per cent. The company tumbled about 6 per cent further in extended trading after posting second-quarter profit that missed estimates.

West Texas Intermediate crude fell 0.6 per cent to US$47.10 a barrel in early Tuesday trading after Brent relapsed into a bear market Monday. The European benchmark crude tumbled as rising Iraqi exports and a rebound in US drilling signaled the global supply glut will grow.

Gold was at US$1,093.98 an ounce after dropping 0.5 per cent Monday.