Asia starts recovery from global stock rout as US futures climb; STI up 0.6%

The benchmark Nikkei 225 index was down 1.06 per cent, or 239.23 points, at 22,351.63 at the open. PHOTO: REUTERS

TOKYO (BLOOMBERG) The biggest sell-off in global stocks since February eased up on Friday (Oct 12), with Asian equity markets recovering some ground and US stock futures surging, while US Treasury yields ticked higher.

The yuan retreated and was the worst performing currency in Asia on Friday after a weaker-than-forecast daily fixing. That followed a Bloomberg report that US Treasury staff concluded that China is not manipulating its exchange rate.

Japan's Nikkei index rose 0.3 per cent as of 3pm in Tokyo, while the Shanghai Composite was up 0.4 per cent, reversing an earlier fall, 1.5 per cent. Hong Kong's Hang Seng index climbed 1.7 per cent.

Singapore's Straits Times Index rose 0.6 per cent or 19.27 points to 3,066.66 as of 2:05pm.

Australia's S&P/ASX 200 Index added 0.2 per cent and South Korea's Kospi index gained 1.5 per cent.

In the United States, the S&P 500 futures were up 0.6 per cent. Tech shares, which bore the brunt of the selling on Wednesday, fared less badly on Thursday as key benchmarks tumbled in excess of 2 per cent for a second straight day.

Investors ascribed a number of reasons for the retreat in equities this week, including worries over the US-China trade war and increasing preoccupation with the risk that the American economy is nearing the end of an extraordinarily prolonged expansion. Remarks by Federal Reserve chairman Jerome Powell last week that the central bank is "a long way" from a neutral level of interest rates also fed into sentiment.

"Folks are re-rating whether the Fed is going to tighten too much - I think that's the fear," said Mr Michael Arone, chief investment strategist at State Street Global Advisors in Boston. Even so, "nothing's really changed in terms of the Fed's path, and I think the economy continues to be quite strong", he said, concluding that investors "have had a violent overreaction".

US President Donald Trump made clear in remarks over the past two days that his take is that the Fed is to blame for sending the S&P 500 to a three-month low.

Next up for investors will be to assess corporate earnings for the third-quarter. JPMorgan Chase & Co, Citigroup and Wells Fargo & Co kick off the season for US banks on Friday.

Back in Asia, Singapore's dollar advanced after the central bank tightened its policy stance as anticipated on Friday. The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool, raised the slope of its currency band slightly.

Traders will be watching the yuan after the report that US Treasury staff advised Secretary Steven Mnuchin that China is not manipulating the yuan, as the Trump administration prepares to issue a closely watched report on foreign currencies.

Elsewhere, West Texas oil edged up, while still heading for the biggest weekly drop since July. The West Texas Intermediate crude rose 0.4 per cent after sliding more than 2 per cent in the previous two days, and traded at US$71.23 a barrel.

Gold slid 0.2 per cent after rising 2.5 per cent on Thursday, and was at US$1,221.80 an ounce.

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