Asian Shares Halt Rally as Crude Below $42;Won Weaken

Asian stocks halted a five-day rally and Malaysia’s ringgit weakened as signs an oil glut is worsening weighed on crude prices. New Zealand’s dollar jumped and South Korea’s won fell following monetary policy reviews.

Shares of raw-materials producers and energy companies were Asia’s worst performers as crude extended its slide below $42 a barrel following a surprise increase in U.S. stockpiles. Equity index futures pointed to gains in European and U.S. stocks following declines in the last session. The kiwi surged to a one-year high after the country’s central bank cut interest rates and signaled a more gradual easing path than some investors had anticipated. The won slid from near a 14-month high as the Bank of Korea indicated it has room to cut borrowing costs from a record low. Nickel snapped a four-day advance.

Crude entered a bear market last week, a sign global growth remains weak even as policy makers from Tokyo to Frankfurt engage in unprecedented stimulus to boost their economies. New Zealand joins Australia and the U.K. in having cut its benchmark rate to a record so far this month, while a strengthening jobs market in the U.S. has yet to convince traders the Federal Reserve will boost borrowing costs this year.

“The biggest risk to the market at the moment is a huge drop in oil prices,” said James Woods, a strategist at Rivkin Securities in Sydney. “We’ll see some near-term weakness in the coming weeks. Investors are likely to be buying on these dips as central bank policies remain supportive of equities.”

A gauge of U.K. home sales pointed to the fastest decline in transactions since the global financial crisis in 2008, Royal Institution of Chartered Surveyors data showed on Thursday. Singapore cut the top end of its 2016 growth forecast after the economy expanded less than previously estimated in the second quarter. Financial markets in Japan were shut for a holiday.

Stocks

The MSCI Asia Pacific excluding Japan Index fell 0.2 percent as of 7:17 a.m. London time, slipping from a one-year high. Australia’s S&P/ASX 200 Index dropped 0.6 percent as Taiwan’s benchmark retreated from its highest close in more than a year.

Hong Kong’s Hang Seng Index climbed to the highest level since November, led by financial companies, after the head of the city’s bourse operator told CNBC an exchange trading link with the Chinese city of Shenzhen will soon be announced. Hong Kong Exchanges & Clearing Ltd. jumped 2.9 percent, headed for its biggest increase since April. China Mobile Ltd., the world’s largest phone carrier by users, gained 2.1 percent after reporting first-half profit that beat analysts’ estimates.

Futures on the Euro Stoxx 50 Index were up 0.4 percent amid a mixed bag of corporate results. Profits at Thyssenkrupp AG, Germany’s largest steelmaker, and Zurich Insurance Group AG dropped, while Deutsche Telekom AG reported an increase in earnings. Futures on the S&P 500 Index added 0.2 percent after the underlying benchmark declined 0.3 percent on Wednesday, retreating from near to a record high.

Currencies

The kiwi rose as high as 73.41 U.S. cents, its strongest level since May 2015, before trading 0.7 percent stronger on the day at 72.55. The Reserve Bank of New Zealand reduced its key rate by 25 basis points to 2 percent. While the cut was expected by all 16 economists surveyed by Bloomberg, the swaps market had priced in a 20 percent chance of a half-point reduction.

“Even though the 25 basis-point rate cut was fully priced in, there was uncertainty that the RBNZ could even have opted for a 50 basis-point rate cut,” said Angus Nicholson, a market analyst in Melbourne at IG Ltd. “Once the 50 basis-point fears turned out to be unfounded the kiwi dollar promptly rallied.”

South Korea’s won snapped a five-day advance, weakening 0.5 percent after reaching its strongest level in more than a year on Wednesday. Bank of Korea Governor Lee Ju Yeol kept the benchmark interest rate at 1.25 percent and said the authority has scope for more policy adjustments. The ringgit slid 0.7 percent as declines in crude prices dimmed prospects for Malaysia, the region’s only major net oil exporter.

Bloomberg’s dollar index, a gauge of the greenback versus 10 major peers, rose less than 0.1 percent. It ended the last session at a seven-week low as the probability of a U.S. interest-rate increase this year slipped to 41 percent in the futures market.

Commodities

West Texas Intermediate crude fell 0.3 percent to $41.57 a barrel, after sinking 2.5 percent on Wednesday as official data showed U.S. supplies increased by 1.06 million barrels last week. Analysts surveyed by Bloomberg had forecast a drop of 1.5 million barrels. Weakness in global crude markets may persist as demand slows seasonally and fuel inventories remain abundant, the Organization of Petroleum Exporting Countries said Wednesday.

“The risk is increasingly to the downside,” said IG’s Nicholson. “The trend from here could well be a much bigger and steady increase in U.S. crude inventories."

Nickel lost 1 percent in London, slipping from a one-year high. Copper rose 0.2 percent and gold declined 0.3 percent.

Bonds

Yields on Australian bonds due in a decade fell for a third day, declining by two basis points to 1.85 percent. New Zealand’s two-year bonds fell and its 10-year notes advanced, flattening the so-called yield curve, following the central bank’s policy meeting.

The yield on U.S. Treasuries due in a decade was little changed at 1.50 percent. It fell on Wednesday as 10-year notes were auctioned at the lowest yield in four years amid near-record demand from a group of buyers that includes foreign central banks and mutual funds.

Source: Bloomberg