Financials hold equities back

Thursday 07.00 BST

What you need to know

  • European equities expected to slip in opening trade
  • Hong Kong financials retreat led by HSBC shares
  • Australian dollar drops to one-week low on exports contraction
  • Dollar recovers slightly from 15-month low
  • Crude oil walks back some of Wednesday’s gains

Overview

Asia Pacific equities were trending lower on Thursday as crude oil pulled back from earlier gains and the dollar inched its way up from a fresh low touched during the previous session.

Hot topic

Equities were broadly lower in Asia amid relative softness for most regional currencies against the dollar, with financial stocks slipping back.

European stock benchmarks are expected to fall, with opening calls from CMC Markets pointing to a 9 point slip for the FTSE 100 ahead of the Bank of England’s rate call and quarterly inflation report. The Xetra Dax 30 is called down 13 points.

In Hong Kong the Hang Seng is down 0.2 per cent with financials under pressure as HSBC hands back some of its recent gains.

Australia’s S&P/ASX 200 index is off 0.2 per cent as the materials segment dropped 0.6 per cent. Miner Rio Tinto fell as much as 2.5 per cent after reporting disappointing underlying earnings for the six months to June. Retailers were holding up reasonably well following Amazon’s announcement of a new retail logistics warehouse in Melbourne, with Wesfarmers recovering from a drop at the open to climb 0.1 per cent.

Tokyo’s Topix index is flat, but soy sauce maker Kikkoman bucked the trend with a rise of as much as 5.2 per cent after it reported that strong first quarter sales had helped drive a near 15 per cent rise in operating profit.

Forex and fixed income

The Australian dollar was losing some of its shine after trade data for July showed exports shrank 1 per cent from the previous month as imports rose 2 per cent. The currency dropped as low as $0.7916 on Thursday, having hovered just below the $0.80 mark for much of the previous two sessions.

That fall also came ahead of the Reserve Bank of Australia’s monetary policy statement on Friday, which may give more detail on comments it made on Monday suggesting a stronger currency could undercut inflation. With stocks underperforming, Australian government bonds were gaining, as yield on the 10-year note fell 3 basis points to 2.675 per cent. Bond yields move opposite to price.

The dollar index, which tracks the greenback against a basket of currencies, was enjoying a mild rebound after touching a 15-month low on Wednesday. The index was up 0.1 per cent in the Asia afternoon session at 92.96. The yield on 10-year US Treasuries was down 1bp at 2.26 per cent.

Japan’s yen was among the only currencies in the region not losing ground to the greenback, trading basically flat at ¥110.73 per dollar.

The pound is flat ahead of the Bank of England’s announcements at midday. Sterling is at $1.3227.

Commodities

Crude oil prices were pulling back from gains made during the previous session. Brent crude, the international benchmark, was off 0.3 per cent at 52.18 a barrel. US marker West Texas Intermediate was down the same amount at $49.43.

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