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Markets Update am

Chinese markets resume downward trend

Europe soft expected to follow Asia

The mainland benchmark, Shanghai Composite, lost 3.9% to 2,659 points, dashing hopes that Friday’s brief recovery could be sustained.

The index was down as much as 4.4% in the morning, hitting a 15-month low.

The losses came despite the G20 meeting in Shanghai over the weekend pledging to work towards boosting growth both in China and globally.

No  new coordinated action to spur global growth and as solid U.S. data revived expectation of the Federal Reserve further raising rates before year-end.

The communiqué from the Shanghai summit included a reference to what the group of the world’s largest economies called “the shock of a potential UK exit from the European Union”, or Brexit, as well as “volatile capital flows, a large drop in commodity prices, escalated geopolitical tensions”.

The yuan edged lower against the dollar as the central bank set a softer midpoint of 6.5452 per dollar – the lowest in almost one month.

Hong Kong’s Hang Seng also lost ground, but fared better than the mainland. The index traded 1.4% lower at 19,102.67 points.

Mixed Japan data

Japanese shares also failed to extend their gains from last Friday, trading flat as the government released mixed economic data.

The latest figures showed industrial output rose by 3.7% in January, the first increase in three months.

However, retail sales disappointed, falling by 0.1% in January, compared to forecasts for a 0.5% rise.

The Nikkei 225 index closed 1% lower at 16,026.76 points.

Gaming giant Nintendo’s shares finished the day 0.5% down, after Friday’s announcement that its full-year profit would be half of its original forecast.At one point in early trade was 5% down.

Elsewhere in Asia

In Sydney, the ASX 200 closed flat at 4,880.9 points.

The lacklustre performance comes ahead of Australia’s fourth-quarter economic growth data released on Wednesday.

In South Korea, the benchmark Kospi index also finished the day flat at 1,916.6 points.

Samsung shares rose by 1.3% following Friday’s decision by a US appeals court to overturn a verdict against the company in a longstanding patent dispute with Apple.

Europe London’s FTSE 100 is down 0.9 per cent in opening trade, with the Xetra Dax 30 down 1.2 per cent. The region-wide Euro Stoxx 600 is down 1 per cent.

The pound remains under the $1.40 mark it lost last week and which is reminiscent of past crises faced by the British currency. Sterling is down 0.1 per cent at $1.3876.

The euro is up 0.2 per cent at $1.0947 — its move higher against the dollar contrasting sharply with the pound’s continuing weakness.

The yen , however, rose more than one percent to trade at 112.80 yen to the dollar, rebounding quickly from one-week low of 114 to the dollar touched on Friday.

With gains of 7.6 percent in February, the yen looks set to make its biggest gain since October 2008.

Even suspected dollar  selling intervention by Seoul, the  South Korean won which fell to 5-1/2-year lows, shedding 3.1 percent this month, on worries about growth prospects in China and tensions with North Korea.
Haven assets are continuing to rally, adding to their status as the best performers of the calendar year. The yen is 0.9 per cent stronger at Y112.98 to the dollar. Gold is up 0.7 per cent at $1.231.20 an ounce.

Elsewhere, the oil markets maintained their relative firmness as short-sellers have reduced their positions following major oil producing countries’ decision to freeze output earlier this month.

While the measure is unlikely to solve the persistent supply glut in the market, it was seen as a first step for further cooperation in the future.

    

The G20 meeting delivered a barrage of fine words about being ready to take action, but nothing tangible, and certainly nothing co-ordinated, other than the rather silly and highly debatable claim that Brexit could deliver an exogenous shock to global growth.

The joint communique just noted that “all policy tools – monetary, fiscal and structural – individually and collectively”. Some analysts even thought that the communique tried to talk down the risks the global economies are facing.

In Eurozone, ECB governing council member Francois Villeroy de Galhau warned that “the danger we face is without any doubt deflation not inflation“. He noted that “oil prices and raw material prices are the driving factors for low inflation.” And, “if the low energy prices have sustainable long-term effects, we have to act. That seems to be the case, but we will see in March.”

 

On the data releases front, Today´s Focus will be on Eurozone CPI which would add evidence for ECB easing in March.

  • Tuesday: Australia building approvals, RBA rate decision; China PMIs; Swiss retail sales; Eurozone PMI manufacturing finals, unemployment, German unemployment; UK PMI manufacturing; Canada GDP; US ISM manufacturing, construction spending
  • Wednesday: Australia GDP; Swiss GDP; UK Construction PMI; Eurozone PPI; US ADP employment, Fed’s Beige Book
  • Thursday: Australia trade balance; Eurozone services PMI final, retail sales; UK PMI services; US jobless claims, ISM services, factory orders
  • Friday: Australia retail sales; Canada trade balance, Ivey PMI; US non-farm payroll, trade balance

 

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