Global share slump continues in Asia as oil to gold extend drops

An electronic board displaying various countries' stock price index outside a Tokyo brokerage.
An electronic board displaying various countries' stock price index outside a Tokyo brokerage.PHOTO: REUTERS

(Bloomberg) - Asian stocks extended losses into a fourth session on Monday following the worst week for global equities this year amid a selloff in commodities and the rallying dollar. Crude oil and gold retreated.

The MSCI Asia Pacific Index declined 0.6 per cent by 9:59 a.m. in Tokyo as Japan's Topix index slid 0.8 per cent. Standard & Poor's 500 Index futures added 0.1 per cent following a slump in US stocks Friday. Oil in New York fell 0.2 per cent, with Brent trading below US$55 a barrel. Gold slipped 0.3 per cent after capping its longest run of weekly losses since 2012. The South Korean won sank to a three-year low.

China reports on industrial company profits Monday, potentially providing more clues on an economic slowdown that has fueled the collapse in commodity prices. Gold is trading near a five-year low and oil is in a bear market amid concern raw-material supplies are outpacing demand. In the US, data on durable and capital goods orders are due, with investors looking ahead to this week's meeting of the Federal Reserve.

"Share markets are likely to remain volatile as we are still going through a seasonally weak period of the year," said Shane Oliver, global strategist at AMP Capital Investors Ltd. in Sydney, which oversees A$160.5 billion. "Uncertainties remain regarding Chinese economic growth and a likely Fed interest rate hike lies ahead for later this year."

The Topix declined a second day, headed for its lowest close in almost two weeks. Technology and consumer stocks led Australia's S&P/ASX 200 Index down 0.3 per cent, while the Kospi index in Seoul slipped 0.4 per cent. New Zealand's S&P/NZX 50 Index lost 0.3 per cent.

West Texas Intermediate crude fell to US$48.08 a barrel in early Monday trading, while Brent was little changed at US$54.66. WTI retreated 5.4 per cent last week for a fourth straight period of losses. It is now down more than 20 per cent from its highest point this year, the common definition of a bear market. Gold for immediate delivery dropped to US$1,096.45 an ounce following last week's 3.1 per cent tumble.

The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, was little changed Monday after adding 0.1 per cent last week in its fifth straight weekly advance. The won lost as much as 0.5 per cent to its weakest level since June 2012.

Disappointing reads on Chinese and European manufacturing Friday sparked renewed selling of commodity-linked currencies, with the Australian dollar returning to its weakest level since May 2009. The currency traded at 72.79 U.S. cents following last week's 1.2 per cent drop.

Bonds benefited, with yields on 10-year New Zealand government notes down a sixth straight day, declining four basis points to 3.29 per cent, while Australian bonds due in a decade yielded 2.76 per cent, down six basis points. Similar maturity US treasuries were little changed at 2.26 per cent after capping a second weekly advance, with rates down eight basis points, or 0.08 percentage point, last week.

Crops, industrial metals and crude led the Bloomberg Commodity Index 1.2 per cent lower on Friday, extending its more-than 13-year low. The S&P 500 sank 1.1 per cent, capping a weekly drop of 2.2 per cent, the most since March.

Commodity stocks also drove the MSCI All-Country World Index's 2.1 percent drop last week, the worst since mid- December. MSCI's Asia Pacific gauge fell 1.5 per cent in the week, the weekly drop this month.

Futures on Hong Kong's Hang Seng Index slipped 0.7 per cent in most recent trading, with contracts on the Hang Seng China Enterprises Index, a gauge of mainland stocks listed in the city, down 1.1 per cent after losses in the gauge on Friday. Futures on the FTSE China A50 Index, which tracks the largest Chinese companies, lost 0.8 per cent and CSI 300 Index contracts declined 3 per cent in Friday trade.

In the US Friday, purchases of new homes unexpectedly retreated in June and prior readings were revised down, painting a picture of less robust improvement during the industry's busiest time of year.

Amid the disappointing economic data, investors sifted through corporate profit reports. The earnings season has so far been spotty for U.S. companies, with sluggish demand overseas damping returns for multinational companies at the same time the dollar has strengthened to near the highest level since April.

From Apple to Caterpillar and Microsoft, a parade of blue chips have disappointed investors in the past two weeks. The impact is having the biggest impact on the Dow Jones Industrial Average, giving it the worst week since January. Analysts are calling for a 4 per cent drop in second-quarter profit for S&P 500 companies, shallower than July 10 estimates for a 6.4 per cent decline.

"Certainly the ongoing collapse in commodity prices emanating from weak data in China and weak earnings reports from companies because of China, such as Caterpillar, are weighing on the market," Jim Paulsen, chief investment strategist at Wells Capital Management Inc. said last week. His firm oversees US$351 billion. "We've got a pretty big collapse going on here."