Asian Shares shake off Losses, Oil firms

Asian shares extended gains on Tuesday, shrugging off downbeat economic data overnight that had pressured Wall Street, focusing instead on a key U.S. jobs report that could give valuable pointers to the timing of the Federal Reserve’s planned interest rate increase.

Crude oil prices firmed after plunging overnight, with U.S. crude CLc1 adding about 0.8 percent to $45.52 a barrel. Brent LCOc1 gained 0.3 percent to $49.66 after skidding 5 percent to six-month lows.

But financial spreadbetters expected subdued openings in Europe, with Britain’s FTSE 100 .FTSE seen opening down by 25-30 points, or 0.3 percent lower. Germany’s DAX .GDAXI was seen opening down by 30-39 points, or 0.3 percent lower, while France’s CAC 40 .FCHI was expected to open down by 20 points, or 0.4 percent lower.

“European equities are set to slip on the open,” Jonathan Sudaria, dealer at Capital Spreads, said in a note. “Overnight markets were a mixed bag with the U.S. down and Asia up, but Europe has decided to take its cue from the U.S.”

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS turned positive and extended gains late in the session as China shares rose, while Japan’s Nikkei stock index .N225 pared losses and ended down about 0.1 percent.

The Shanghai Composite Index .SSEC rose more than 3 percent and the CSI300 index .CSI300 added 2.8 percent. Beijing has taken a raft of steps to support Chinese share markets after they lost more than 30 percent of their value since peaking in June, keeping investors cautious despite the gains.

“The market is still very volatile … investors are likely to be quiet and see what the next step of the government will be,” said Patrick Yiu, a director of CASH Asset Management in Hong Kong.

“The overall market momentum is not likely to pick up anytime soon and the economy in China is still very weak,” added Yiu.

U.S. equities markets stumbled overnight, after manufacturing data from China and the U.S. both disappointed.

The Institute for Supply Management’s index of national factory activity slipped to 52.7 in July, falling short of expectations that it would match last month’s reading of 53.5.

The weak reading, and fears of disinflation stemming from the rout in oil prices, led investors to pare bets that the Fed’s long-awaited interest rate hike will come as early as September.

Friday’s employment data is expected to show the U.S. economy created 225,000 new jobs in July, according to economists polled by Reuters. The unemployment rate is expected to hold steady at 5.3 percent.

“If we get some certainty about the strength of the U.S. economy and the likelihood of policy normalization by the Fed, and if a rate hike seems justifiable, that is positive for sentiment for global risk-on because a lot of people have been bracing for this,” said Stefan Worrall, director of cash equities at Credit Suisse.

The dollar edged down about 0.1 percent on the day against its Japanese counterpart to 123.90 yen JPY=, while the euro was slightly higher at $1.0958 EUR=.

Commodity currencies stabilized after facing pressure from crude oil’s tumble.

The Canadian dollar edged up after earlier notching a fresh 11-year low of C$1.3176 per U.S. dollar CAD=D4. Canadian markets will reopen on Tuesday after they were shut for a public holiday on Monday.

The Australian dollar soared 1.2 percent to $0.7375 AUD=D4, moving away from last week’s six-year low of $0.7234 after the Reserve Bank of Australia held its cash rate unchanged at a record low 2.0 percent as expected, and also toned down its calls for a weaker currency.

The Aussie also got a lift from Australian retail sales data, which showed a better-than-expected 0.7 percent rise in June, beating expectations of 0.5 percent growth.

Spot gold XAU= edged up about 0.2 percent to 1,088.06 per ounce, but remained not far from a 5-1/2-year low as expectations that the Fed is set to raise interest rates this year undermined the metal.

Source: Reuters