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Asian Stocks Fall With U.S. Futures as Oil Slides

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Asian shares dropped with U.S. equity index futures as oil prices slumped and Apple Inc.’s results disappointed. Australia’s dollar strengthened after inflation data.

Energy companies led declines on the MSCI Asia Pacific Index, which retreated from a two-week high. Apple, the world’s largest company, fell as much as 3.1 percent in after-hours U.S. trading following its first annual sales decline since 2001. European equity index futures were little changed. Crude oil sank to a three-week low after Russia said it wouldn’t join output cuts planned by OPEC, while aluminum surged in China. The Aussie rose by the most in a week as a pickup in inflation curbed speculation another interest-rate cut is coming.

“Plenty of countries want an exemption to the OPEC output cuts and that’s putting pressure on oil,” said James Audiss, Sydney-based senior wealth manager at Shaw and Partners Ltd., which oversees about $7.5 billion. “Apple’s forward expectations aren’t great and it’s susceptible to more of a pullback.”

Sliding prices for Apple iPhones and a forecast for lower-than-expected profitability over the holiday period cast a cloud over an earnings season that’s been generally positive, with about three-quarters of the S&P 500 Index companies to have reported so far beating estimates. Skepticism about major oil producers’ ability to agree output reductions continues to hang over financial markets, which nonetheless have become more settled as traders grow more confident about the outcomes of the U.S. presidential election and this year’s Federal Reserve policy meetings.

Bank of America Merrill Lynch’s GFSI Market Risk Index — a measure of future price swings implied by options trading on global equities, interest rates, currencies and commodities — has fallen to the lowest since 2014. Hillary Clinton’s odds of victory in next month’s vote are close to the highest on record at 86.5 percent, according to forecaster FiveThirtyEight, and futures trading indicates a 73 percent chance of a U.S. interest-rate hike by December.

Stocks

The MSCI Asia Pacific Index was down 0.2 percent as of 7:09 a.m. London time. Benchmark share gauges in Australia and South Korea slid by the most in six weeks, while the Shanghai Composite Index retreated from a nine-month high. Japan’s Topix index advanced 0.4 percent to its highest since April, recovering from earlier losses.

“We continue to be in a wait-and-see mode as earnings are released, and small changes in sentiment are moving the market,” said Naoki Fujiwara, chief fund manager with Shinkin Asset Management Co. in Tokyo.

Wesfarmers Ltd., Australia’s largest retail chain, tumbled by the most since 2009 in Sydney after sales at its Coles supermarkets missed estimates. Great Wall Motor Co. plunged 10 percent in Hong Kong after China’s biggest maker of SUVs was downgraded by JPMorgan Chase & Co. and Nomura Holdings Inc. in the wake of earnings. Galaxy Entertainment Group Ltd. climbed to a 14-month high after Macau’s second-biggest casino operator by market value posted a better-than-expected profit.

Futures on the Euro Stoxx 50 Index were steady after companies including Airbus Group SE, Banco Santander SA and Bayer AG posted their results. S&P 500 contracts fell 0.2 percent, after the underlying gauge declined on Tuesday by the most in two weeks as data showed consumer confidence receded in the world’s biggest economy.

Commodities

Crude oil slid 1.3 percent to $49.29 a barrel in New York. Output cuts are not an option for Russia, the nation’s envoy to the Organization of Petroleum Exporting Countries said, according to Interfax. American supplies rose by 4.75 million barrels last week, industry data showed ahead of Wednesday’s release of official figures.

Aluminum in Shanghai jumped as much as 5.2 percent to its highest level since 2014, extending a rebound on speculation that transport bottlenecks may have created a shortage for some users in China. The metal rose 0.2 percent in London.

“There is a shortage of metal in the system right now,” Paul Adkins, managing director of consultancy AZ China Ltd., said by phone Nanning in southern China. “The cost of road freight has gone up and this has created a rail bottleneck in the aluminum provinces in the north ofChina. There appears to be a lot of metal stuck in warehouses.”

Gold held near a three-week high amid speculation demand will strengthen in the run-up to this weekend’s Diwali festival in India, the world’s largest bullion-consuming country after China. It’s still down for the month and Oversea-Chinese Banking Corp., the most-accurate forecaster for the precious metal in the latest rankings compiled by Bloomberg, predicts the price will drop by about 14 percent to $1,100 an ounce by the end of next year as Fed rate increases boost the dollar.

Currencies

The Aussie strengthened 0.6 percent versus the greenback, the best performance among major currencies. Consumer prices in Australia increased 1.3 percent from a year earlier in the last quarter, exceeding the previous period’s 1 percent gain and the 1.1 percent rise forecast in a Bloomberg survey.

“A jump in headline inflation will help calm RBA fears over inflation expectations and thus means a steady hand on rates into year end,” said Sean Callow, a senior strategist at Westpac Banking Corp. in Sydney.

The Bloomberg Dollar Spot Index was little changed, after retreating 0.1 percent from a seven-month high on Tuesday. The pound weakened 0.2 percent.

Bonds

Australia’s two-year bond yield increased by two percentage points to a one-week high of 1.69 percent. The probability that the central bank will cut interest rates by mid-2017 dropped to 29 percent in the swaps market, from 37 percent on Tuesday.

The yield on U.S. Treasuries due in a decade declined by one basis point to 1.75 percent, trimming October’s increase to 15 basis points. American sovereign debt is saddling investors with losses for the third month in a row as speculation mounts that inflation will quicken and the Fed will boost interest rates.

“The cyclical low for inflation rates has almost certainty past,” said Peter Jolly, the global head of markets research at National Australia Bank Ltd. in Sydney, who predicts headline consumer-price gains in the U.S. will rise above 3 percent early next year if oil prices remain at current levels. “That will help change market perceptions of inflation ahead, and put to rest deflation fears for now.”

Source: Bloomberg