Asian markets and oil in retreat, China exports slump

March 9, 2016 | 11:54 pm PT
Asian markets mostly fell Tuesday as investors cashed in after enjoying their best rally so far this year, while China released data showing another hefty slump in exports and Brent oil retreated from near 2016 highs.

Profit-takers made the most of the latest surge in prices that has come on the back of upbeat US data and hopes that China will ramp up its efforts to kickstart the world's number two economy.

Figures from Beijing showed exports dived more than a quarter on-year in February, while imports were almost 14 percent off, far worse than forecast in a Bloomberg survey.

The numbers are the latest to highlight weakness in the economy, although officials pointed out that they were skewed by the Chinese New Year holiday that saw factories shut down for a week.

The timing of Chinese New Year is based on the lunar calendar, and shifts every year.

However, Frederic Neumann, co-head of Asian economic research at HSBC Holdings in Hong Kong, said: "Exports got pummelled again in February, highlighting the downturn in global demand.

"It’s easy to blame Chinese New Year distortions, but there is a much deeper malaise that is becoming apparent in the numbers."

However, Shanghai stocks, which slumped more than two percent at one point, ended 0.1 percent higher. Hong Kong lost 0.7 percent in the afternoon.

The figures come as China's leaders hold their annual policy gathering, which started Saturday with Premier Li Keqiang targeting 6.5-7 percent economic growth this year.

The lower and wider band indicates leaders accept the tough work ahead as they look to recalibrate the giant economy from one dependent on exports and investment to domestic-driven growth.

In Japan the government said the world's number three economy contracted slightly less than first thought in the final three months of 2015. But the minor improvement was scant consolation for Prime Minister Shinzo Abe, whose big-spending, loose monetary policy blitz to reinvigorate the economy has been called into question by a series of disappointing readings.

Junichi Makino, chief economist at SMBC Nikko Securities, said: "We cannot take a positive view (on the revised data)... There is no change to our outlook that the economy is stagnant."

The news will put fresh focus on the Bank of Japan when it meets next week, with expectations it will further loosen monetary policy.

Despite the prospect of fresh cash being pumped into the financial system the yen ticked higher against the dollar. The greenback bought 112.99 yen in afternoon trading, against 113.41 yen in New York. That hit exporters on the Nikkei index, which ended down 0.8 percent.

"We might be experiencing a bit of exuberance," Michael McCarthy, chief market strategist at CMC Markets Asia Pacific in Sydney, told Bloomberg News.

"Japanese markets have gone up significantly, making it vulnerable for a correction. The GDP has acted as a trigger for the selloff in Tokyo."

Other regional markets were also in negative territory, with Sydney off 0.7 percent by the close and Seoul down 0.6 percent. There were also losses in Singapore, Manila and Jakarta.

Oil prices dipped slightly following healthy gains that saw Brent break the $40 barrier for the first time in 2016 and US benchmark West Texas Intermediate approach $38. Brent was down 1.3 percent and WTI off 1.2 percent Tuesday.

The commodities, which just months ago were trading below $30, have enjoyed strong buying interest in recent weeks on hopes that key producers will freeze output.

Adding to the upbeat outlook for prices this week was another cut in the US rig count to more than five-year lows, healthy US economic data and a promise from China's leadership to kickstart its giant economy.

Saudi Arabia, Russia, Qatar and Venezuela last month agreed to freeze output at January levels if other producers followed suit, although details of an expected producers' meeting this month are still scant. - AFP

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