Asian shares slip, copper tumbles as worry takes toll

By: | Updated: November 18, 2015 1:14 PM

An index of Asian shares fell on Wednesday as copper prices tumbled and another bomb scare in Europe and gunfire in the French capital hurt risk appetite

asia stock marketAsian share markets were cautious on Wednesday as another bomb scare in Europe days after the deadly Paris attacks left investors in a contemplative mood, giving a boost to safe-haven US bonds and the dollar. (Reuters)

An index of Asian shares fell on Wednesday as copper prices tumbled and another bomb scare in Europe and gunfire in the French capital hurt risk appetite, while bets that the Federal Reserve remains on track for a rate hike underpinned the dollar.

Spreadbetters expected the weakness to carry over into European trade, with Britain’s FTSE 100 expected to open down by 0.3 percent, while Germany’s DAX and France’s CAC were seen down as much as 0.7 percent.

“The rally in US equity markets that followed on from European markets strong lead this week was stopped dead in its tracks last night, on reports of a multiple bomb threat in Hannover, with the result that the Germany versus Holland game was cancelled,” Michael Hewson at CMC Markets in London said in a note to clients.

Wall Street shares ceded earlier gains to end almost flat after news that German authorities called off the soccer match which German Chancellor Angel Merkel was due to attend, sparking fears of another attack coming only days after the deadly assault in Paris.

Then gunfire erupted in a north Paris suburb early on Wednesday as special police forces launched an operation to catch one of the suspects believed to be behind gun and bomb attacks in which 129 people were killed last week, a police source told Reuters.

Separate Air France flights to Paris from the United States were diverted as a security precaution late on Tuesday, which also weighed on sentiment.

The greenback struck a fresh seven-month high against a basket of currencies earlier in the session after U.S. economic data reinforced expectations that the U.S. central bank will increase interest rates next month for the first time in nearly a decade.

The dollar edged lower late in the Asian day, though its strength for most of the session undermined dollar-denominated commodities, making them more expensive for holders of other currencies.

Copper continued to suffer, shedding 1 percent to $4,637.50 a tonne after hitting a 6-1/2-year low of $4,590 overnight, amid fears of waning demand from China.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped about 0.2 percent.

Shanghai shares were down about 0.1 percent but off earlier session lows after data showing Chinese home prices rose for first time in over a year in October on an annual basis. That signalled stabilisation in the housing market, which could help re-energise the listless economy.

Japan’s Nikkei bucked the downtrend, adding about 0.1 percent as the yen shrugged off its traditional status as a safe-haven currency and was lower for most of the session.

In contrast with the Fed’s expected course of action, the Bank of Japan is expected to hold steady at its two-day policy meeting that began on Wednesday.

“We’re seeing very encouraging signs today, especially the dollar’s strength against the yen and the aggressive gains we’re seeing in some cyclical stocks, particularly those with U.S. exposure,” said Stefan Worrall, cash equities manager at Credit Suisse in Tokyo.

U.S. Treasuries bounced back on safety bids overnight, with the 10-year yield slipping from day’s high of 2.313 percent. It stood at 2.262 percent in Asian trade, not far from its U.S. close of 2.261 percent.

The lower yields failed to dampen enthusiasm for the dollar as investors focused on Tuesday’s U.S. economic data that affirmed a solid economic picture, supporting the case for the Federal Reserve to raise interest rates in December.

U.S. consumer prices increased in October from the previous month after two straight months of declines, putting annual core inflation at 1.9 percent.

Industrial output fell short of market expectations but the output in the manufacturing sector posted a solid increase.

The dollar index was flat at 99.620, after hitting a high of 99.756, within sight of its 12-year peak of 100.39 set in March.

Against the yen, the dollar edged down about 0.1 percent to 123.28 yen, but still within sight of a 2-1/2-month high of 123.60 yen hit on Nov. 9.

The euro was steady $1.0645, not far from Tuesday’s seven-month low of $1.0630, as the common currency continues to be undermined by expectations that the European Central Bank will take fresh monetary easing steps next month.

Gold hit a 5-1/2-year low of $1,064.95 per ounce as the strong dollar offset its traditional safe-haven appeal. It last stood at $1,070.15, down slightly.

Oil prices rebounded a tad after data showed an unexpected stockpile draw for last week, though they remained not far from 6-1/2-year lows hit in August on persistent concerns about a global supply glut.

U.S. crude futures were up about 0.8 percent at $40.99 per barrel, moving off Tuesday’s low of $40.58, while Brent last stood at $43.92, up about 0.8 percent but less than $2 away from its August low of $42.23.

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