Asia shares fall as global energy crunch fuels inflation worries

Japan's Nikkei stock index slid 1.03 per cent.
Japan's Nikkei stock index slid 1.03 per cent.PHOTO: EPA-EFE

HONG KONG (REUTERS) - Asian shares dropped and the safe-haven US dollar held firm on Tuesday (Oct 12), as a global energy crunch fuelled inflation fears, clouding investor sentiment before the US corporate earnings season.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.9 per cent in early trade, after US stocks ended the previous session with mild losses. United States stock futures, the S&P 500 e-minis, fell 0.43 per cent.

Australian shares slipped 0.29 per cent, while Japan's Nikkei stock index slid 1.03 per cent.

China's blue-chip CSI300 index was 0.75 per cent lower, while Hong Kong's Hang Seng index opened 1.35 per cent lower.

Singapore's Straits Times Index was down 0.4 per cent at 10.28am local time.

"Risk markets had a mixed start to the week amid light data flow and ahead of the US earnings season," ANZ analysts said in a note.

"Economies appear to be entering a more challenging phase of the cycle and we think investors and corporates will be monitoring how the economic data and earnings results fall before making assessments of near-term direction."

Also weighing on investor sentiment was China Evergrande Group. Reuters reported that some of its offshore bondholders had not received interest payment by a Monday deadline. Rivals Modern Land and Sinic became the latest developers scrambling to delay bond payment deadlines.

Evergrande's debt troubles and contagion worries have sent shockwaves across global markets in recent months and the firm has already missed payments on dollar bonds, worth a combined US$131 million (S$177.6 million), that were due on Sept 23 and Sept 29.

Wall Street's main indexes ended a choppy session lower on Monday as investors grew nervous ahead of third-quarter earnings reporting season.

A rally in basic material and energy shares on higher oil prices initially lifted major US stock indices. But the gains faded amid concerns about earnings, set to kick off with JPMorgan Chase & Co results on Wednesday.

Some analysts expect companies to report slowing growth due to supply chain snags and rising prices. They warned that this could lead to a drop in US stocks.

JPMorgan shares were down 2.1 per cent and among the biggest drags on the S&P 500, which lost 0.69 per cent to 4,361.19.

The Dow Jones Industrial Average fell 0.72 per cent to 34,496.06, while the Nasdaq Composite dropped 0.64 per cent to 14,486.20.

After US data last week showed weaker jobs growth than expected in September, the focus now shifts to inflation and retail sales numbers this week. Investors also expect the Federal Reserve to begin tightening policy by announcing a tapering of its massive bond-buying next month.

The prospect of accelerating inflation and tighter monetary policy lifted bond yields.

The benchmark 10-year yield touched 1.6136 per cent after a strong rise on Monday. The two-year yield rose to 0.3517 per cent, up from its US close of 0.318 per cent.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up at 94.423.

Gold, usually seen as a hedge against inflation, was slightly lower. Spot gold was traded at US$1753.55 an ounce.

Oil prices, which had jumped on Monday on rebounding demand and cutbacks in supply, dropped slightly, with US crude down 0.36 per cent to US$80.23 a barrel. Brent crude fell to US$83.39 a barrel.