Commodities sell-off hits Asian stocks, dollar up
A sudden drop in commodity prices prompted investors to take profits on Asian stocks on Wednesday while the U.S. dollar held firm ahead of job data due later in the week, though the bull market in raw materials was seen as far from over.
Oil fell for a second day to near $89 a barrel, extending the previous session's 2.4 percent drop as investors sold off commodities after a strong year-end rally. Gold inched up, though, after sinking more than 2 percent on Tuesday.
S&P futures slipped 0.2 percent, pointing to a softer opening on Wall Street later in the day.
The fall in commodities to their lowest level in seven weeks and a stronger dollar weighed on shares of resource companies in Asian trade, although market analysts said it was likely to have only a limited impact.
As long as emerging nations keep their firm economies, notably China, commodities will likely stay on an upward trend, but there will surely be some profit-taking from time to time if prices go too high, said Ayako Sera, market strategist at Sumitomo Trust & Banking in Tokyo.
The MSCI index of Asian shares excluding Japan <.MIAPJ0000PUS> fell 0.70 percent with technology and energy sectors the biggest decliners, while the consumer discretionary sector outperformed.
Shares in Hyundai Motor Co <005380.KS> rose 6.2 percent on strong U.S. auto sales and a court approval for its takeover of top builder Hyundai Engineering & Construction Co Ltd <000720.KS>.
Australian stocks fell 0.6 percent, pulling the index to its lowest close in nearly a month, hurt by the commodities sell-off and fears that massive floods in northern Queensland state would hurt miners. The Australian dollar fell to one-week lows.
Japan's benchmark Nikkei <.N225> closed down 0.2 percent, with investors largely shrugging off concerns about commodity prices and looking instead to U.S. non-farm payrolls data on Friday to provide further evidence of a sustained economy recovery.
Investors are focusing on the U.S. payroll data, so they may stay on the sidelines for this week, but the mood is positive, said Hiroichi Nishi, general manager at Nikko Cordial Securities.
The U.S. dollar bounced from three-week lows against the euro on Tuesday and held firm in Asia trade at around 82 yen after upbeat U.S. manufacturing data, and more gains are seen likely given the heavy sales of euro zone bonds anticipated this year.
The dollar index, which measures its value against major currencies, edged up 0.2 percent to 79.577 <.DXY>. The dollar index is up around 0.6 percent this week, having regained some ground after sliding 1.8 percent last week.
Incoming U.S. data is quite good and that's part of the reason why I think the dollar is going to remain with a reasonable bid tone, said Richard Grace, chief currency strategist at Commonwealth Bank.
There was little reaction in Asian markets to minutes of the Federal Reserve's December meeting released on Tuesday, which revealed policy makers felt the U.S. economy still needed help despite signs of strength.
The U.S. economy, having emerged from its deepest recession in generations in the summer of 2009, has since expanded in fits and starts. Gross domestic product rose at a 2.6 percent annual rate in the third quarter, a pace still seen as too low to bring down the country's 9.8 percent jobless rate.
U.S. Treasuries inched up in Asia on Wednesday as investor appetite for riskier assets like stocks and commodities cooled slightly after a bullish start to the year.
The benchmark 10-year Treasury note rose 3/32 in price to yield 3.31 percent, down about 2 basis points from late U.S. trade on Tuesday.
The stronger dollar weighed on copper futures in London and Shanghai after prices slid from record highs in the previous session.
Crude oil slipped 20 cents to $89.18 a barrel, extending Tuesday's losses, but spot gold rose 0.3 percent to $1,383.40 an ounce.
(Additional reporting by Ian Chua in SYDNEY; Editing by Kim Coghill)
(Additional reporting by Ian Chua in SYDNEY; Editing by Kim Coghill)
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