Hong Kong: Asian shares pulled back on Wednesday after a sell-off on Wall Street prompted a round of profit-taking, even as upbeat Australian economic growth figures reassured on the health of recovery.
Japan’s Nikkei average led losses with a drop of 2.6% after a slide in financial shares hit US indexes, while the drop in oil prices the previous day took a toll on resource related shares such as oil-and-gas field developer Inpex.
Some of Tuesday’s sharp moves partially reversed as markets settled down.
US crude oil prices rose 57 cents a barrel to $68.62 having slid nearly 3% the previous day. The Australian dollar climbed 0.5% to $0.8300, bouncing back from its biggest one-day drop since June.
The Aussie got a boost after data showed Australian second-quarter GDP rose a surprisingly strong 0.6% from the previous quarter, reviving expectations for the country’s central bank to start raising policy rates from the current 3% as soon as November.
Manufacturing surveys from around the world on Tuesday provided more evidence that the global recovery accelerated in August. JPMorgan’s global gauge of factory activity showed growth returning for the first time in 15 months.
The Reserve Bank of Australia is poised to be the first among major central banks to start raising rates and normalising the extremely loose policies around the world that were aimed at reviving the global economy from the worst recession in decades.
“That supports the Reserve Bank’s case for an eventual rise in interest rates. We think maybe they’ll go in November, but they don’t want to move too fast and endanger the recovery,” said Brian Redican, senior economist at Macquarie in Sydney.
The Australian dollar took a hit the previous day after the RBA declined to adopt an outright bias towards a tighter policy at a regular meeting, even as the central bank highlighted the economy’s strength.
The MSCI index of Asia-Pacific shares outside Japan fell 1.3%, holding up better compared with a 2.2% drop in the US S&P 500 on Tuesday.
Material and financial shares were the biggest drag on the MSCI benchmark for Asia.
Helping limit losses was a 1.6% jump in the Shanghai Composite index, helped by gains in Sinopec and PetroChina after China hiked fuel prices to a near-record high.
PetroChina, the Shanghai Composite’s most heavily weighted stock, gained 1.56% but its Hong Kong-listed shares dipped 1.3%.
The Shanghai index was up for a second day running and seemed to regain its composure after a nearly 7% sell-off on Monday.
Worries about banks clamping down on lending after a splurge earlier in the year to pay for government stimulus have spooked the market. But analysts have warned investors not to read too much into the opaque and volatile market mostly closed to foreigners.
In currencies, the dollar was little changed after jumping the previous day as the Aussie and euro fell back on the slide in riskier assets.
The dollar index, a gauge of its performance against six major currencies, was flat at 78.744.
But against the yen, the dollar dipped as far as 92.51 yen, a seven-week low, as the Japanese currency posted broad gains from renewed worries about holding risky positions in higher-yielding currencies.
Government bond markets extended their winning streak, one of the signals that has worried some investors by suggesting the stock market rebound may be overdone.
The yield on five-year Japanese government bonds fell a basis point to 0.590%, a four-year low and underscoring how ultra-low interest rates are expected to persist for a while in the Bank of Japan’s battle against deflation.