Asian stock rally fizzles amid earnings as euro drops with oil

A man looks at an electric quotation board displaying the Nikkei key index of the Tokyo Stock Exchange in Tokyo.
A man looks at an electric quotation board displaying the Nikkei key index of the Tokyo Stock Exchange in Tokyo.PHOTO: AFP

HONG KONG/SYDNEY (BLOOMBERG) - Asian stocks snapped a three-day winning streak on Friday (Oct 21) as corporate earnings gave cause for caution and the euro sank to its weakest level since March. Crude oil retreated amid skepticism major producers will limit output.

About the same number of shares rose as fell on the MSCI Asia Pacific Index, with Healthscope and Keppel Corp sliding in the wake of results.

The MSCI Asia Pacific Index fell 0.1 per cent as of 11.17am Tokyo time, trimming this week's advance to 1.3 per cent. Benchmarks in China, Japan and Taiwan had moves of less than 0.2 per cent. Earnings season in Japan ramps up next week, with more than 350 Topix companies set to report results.

The euro slid for a fourth day after the European Central Bank signaled on Thursday that its quantitative-easing programme is likely to run past the currently scheduled end-date of March 2017. The US dollar strengthened versus most peers and South Korea's won was the worst performer among major currencies.

US crude was below US$51 (S$71) a barrel after Russia's largest oil company said the nation could boost production.

The latest batch of worldwide corporate earnings has presented a mixed picture with lackluster forecasts from Nestle and eBay on Thursday being countered by upbeat news from companies including Microsoft and American Express. ECB president Mario Draghi said Thursday that the authority's bond-buying programme will likely be tapered before it is halted. The hint of an extension to its record stimulus comes as the Federal Reserves weighs the case for its first interest-rate increase since December, with traders betting a move will come in December.

"There's no shortage of things that will generate volatility," said Mr Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about US$7.2 billion. "But unless something comes out of left field, the Fed will hike in December and that means the economy is on a solid footing and that's positive."

Markets in Hong Kong are closed for at least the morning on Friday as the outer bands of Typhoon Haima begin to lash the city. Malaysia is scheduled to announce its budget for 2017 and a speech by Fed Bank of San Francisco president John Williams may shed light on the outlook for US monetary policy.

Futures on the S&P 500 Index were down 0.1 per cent. Microsoft surged as much as 6.2 per cent in after-hours trading after first-quarter sales and earnings topped analysts' estimates. Senior executives at AT&T and Time Warner have met in recent weeks to discuss various business strategies including a possible merger, according to people familiar with the matter.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, added 0.2 per cent after rallying 0.5 per cent in the last session. The won dropped 0.6 per cent and Taiwan's dollar slipped 0.5 per cent.

The euro dropped 0.3 per cent to US$1.0901, falling for the first time through the low recorded on June 24, when the outcome of Britain's vote to leave the European Union was announced.

Mr Draghi said on Thursday that officials did not talk about extending or tapering the institution's €1.7 trillion quantitative-easing programme. That leaves traders waiting until at least December for news about policy changes.

"It's a double-whammy from the ECB meeting," said Mr Matt Simpson, a senior market analyst at ThinkMarkets in Singapore. "Draghi didn't talk tapering and suggested easing in December. That's got traders pricing in a weaker euro."

Crude oil fell another 0.4 per cent to US$50.41 a barrel in New York, after sliding 2.3 per cent on Thursday. Rosneft PJSC chief executive officer Igor Sechin said Russia is capable of a substantial boost to production less than two weeks after President Vladimir Putin pledged his support for international efforts to limit output. Nigeria also said on Thursday that it cut the price of every type of crude it sells in an effort to boost its global oil market share.