Asian stocks under pressure from weak commodities prices
A slide in commodities prices pressured Asian resources shares Tuesday, as investors in the region also try to navigate global central banks’ split approaches to monetary policy.
Expectations the Federal Reserve will raise interest rates at its December meeting have strengthened the U.S. dollar. Coupled with demand worries, a stronger currency helped push base metals from copper to aluminum and nickel to multiyear lows on Tuesday.
Australia’s S&P ASX 200 XJO, -0.95% fell 0.9% to 5173.20, after closing on Monday at its highest level in about a month. The materials sector fell 1.1%.
The Nikkei Stock Average NIK, +0.23% rose 0.2%, though nearing a high since late August. Investors there await central bank minutes on Wednesday for insights on the Bank of Japan’s decision to keep its annual asset purchase target unchanged despite slowing growth.
South Korea’s Kospi SEU, +0.63% gained 0.7% while Hong Kong’s Hang Seng Index HSI, -0.83% slipped 0.7%.
The Shanghai Composite Index fell 0.5% SHCOMP, -0.54% amid worries that a wave of initial public offerings before the year-end could trigger volatility as investors free up holdings to invest in new share listings.
“I think Asian markets are in a trading range until there’s clarity” on moves by the Fed and the European Central Bank, said Scott Clemons, chief investment strategist at Brown Brothers Harriman. The ECB has hinted it stands ready to unleash more stimulus as soon as its December meeting. “Dollar strength is likely to continue and that puts a cap on Asian markets.”
The U.S. dollar has strengthened as investors wager that the Fed will raise interest rates for the first time since June 2006 at its December policy meeting. The euro EURUSD, -0.1316% hit a seven-month low Monday in Asia at $1.0591 but strengthened slightly to $1.0634 on Tuesday.
On Tuesday, several base metals traded near multiyear lows as a stronger dollar adds to worries about weaker global demand. Many metals are priced in dollars and become more expensive to global buyers as it strengthens.
Three-month copper futures on the London Metal Exchange last traded at $4,463 a ton, down from the opening price of $4,480 per ton, after sinking to a 6½-year low on Monday.
Aluminum last traded at $1,441 per ton, marginally higher than the opening price of $1,438.50 a ton. The metal also slipped to a 6½-year low on Monday.
On Tuesday, nickel hit a fresh 12-year low at $8,145 per ton, before rising to $8,205 per ton.
The losses are pressuring Australia’s mining shares with BHP Billiton Ltd. BHP, -2.30% BLT, -1.60% BHP, -1.79% down 1.1% and Rio Tinto Ltd. RIO, -1.33% RIO, -0.70% RIO, -1.48% 0.7% lower.
Australian shares rallied to their highest since late October Monday, despite continued weakness in commodities, as investors bought bank and consumer stocks. Analysts say demand for dividend-paying assets after a summer selloff has driven investors toward Australian banks, while an improving domestic economy has inspired buying among the retailers.
In Hong Kong, a benchmark of material shares fell 1.5%, with energy firm China Shenhua Energy Co. 601088, -1.29% down 2%.
Shares of commodities trader Noble Group fell 2.4% after Standard & Poor’s put the firm’s investment-grade rating on a negative credit watch. The move means the rating agency could downgrade the company in the next three months. Singapore’s FTSE Strait Times Index rose 0.2%.
In China, some 28 companies are expected to list before the end of 2015, after authorities froze new listings during the summer stock selloff.
Source: MarketWatch – Asian stocks under pressure from weak commodities prices
