Asia shares extend losses, dollar firms but off highs

A man (R) cleans electronic boards showing Japan’s Nikkei average, the exchange rate between the Japanese yen against the U.S. dollar and stock quotation outside a brokerage in Tokyo, Japan, in this 6 April 

Reuters: Asian shares extended losses on Thursday after disappointing earnings from technology giant Apple dragged on Wall Street, while the dollar firmed but remained shy of this week’s nearly nine-month highs.

An overnight slide in oil prices combined with disappointment over Apple’s earnings had prompted a broad sell off in the technology sector, wrote Michael Hewson, chief market analyst at CMC Markets in London.

“You have the recipe for some broader profit-taking at a time when both European and U.S. equity markets are closer to, or at their peaks,” Hewson said.

“Markets in Asia have followed on from this weak lead this morning and this looks set to lead to a weaker open for European markets this morning.”

CMC Markets expected Britain’s FTSE 100, France’s CAC 40 and Germany’s DAX to open moderately lower.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.9% in afternoon trade.

Adding to the subdued mood, data showed profit growth in China’s industrial firms slowed last month from the previous month as several sectors showed weak activity, suggesting the world’s second-biggest economy remains underpowered.

Further denting sentiment, China’s offshore yuan notched fresh six-year lows on Thursday after the People’s Bank of China set a weaker midpoint.

The Hang Seng index fell 1.1%, while the China Enterprises Index lost 1.4%.

Apple, the world’s largest company by market capitalisation, fell 2.2% on Wednesday after it acknowledged strong demand for its iPhone 7 Plus caught it off-guard and it was struggling to keep up with demand.

Besides Apple, results and forecasts from some other major U.S. companies also weighed on U.S. markets overnight. The S&P 500 and the Nasdaq Composite both skidded, though a standout performance by Boeing lifted the Dow Jones industrial average.

Tokyo’s Nikkei stock index slumped 0.3%, though a weaker yen underpinned shares.

“Market participants welcome recent yen weakness,” said Hiroki Allen, chief representative of Superfund Japan in Tokyo, who said investors appeared to take profits in the afternoon, selling stocks that have risen in recent sessions.

Later on Thursday, investors will look to the third-quarter British gross domestic product data.

Then comes the latest data on U.S. durable goods, jobless claims and pending home sales. 

“These reports are not expected to have a dramatic impact on the dollar but with USD/JPY eyeing 105, stronger reports could give the pair the push that it needs to make a run for this key level,” wrote Kathy Lien, managing director at BK Asset Management.

The dollar added 0.2% to 104.61 yen, moving back toward this week’s high of 104.87 yen touched on Tuesday, its highest level since late July.

The euro inched down slightly to $1.0904, while the dollar index stood at 98.669, within sight of Tuesday’s nearly nine-month high of 99.119.

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Expectations for a year-end rate increase by the Federal Reserve persisted, and have bolstered the dollar.

In recent weeks, market participants have been pricing in more than a 70% chance that the U.S. central bank would raise interest rates in December, according to CME Group’s FedWatch program.

U.S. growth figures scheduled for release on Friday could reinforce or temper the expectations of a Fed rise.

Crude oil futures nursed losses after settling down more than 1% on Wednesday even after a surprise drawdown in U.S. crude inventories, as traders remained cautious that OPEC would be able to cut production come late November.

U.S. crude edged up 0.2% to $49.28 a barrel, while Brent crude added 0.3% to $50.12.

Spot gold rose 0.1% to $1,268.50 an ounce.