Asia shares sag on caution, dollar consolidates

Asian stocks sagged on Monday after Wall Street’s uninspiring performance on Friday and ahead of key economic indicators, while the dollar consolidated its gains against the yen and euro.

Spreadbetters forecast shaky sentiment spilling over into European equities, predicting a lower open for Britain’s FTSE, Germany’s DAX and France’s CAC.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed. Shanghai shares fell 0.2%. Financial markets in South Korea, Hong Kong and Taiwan were closed Monday for public holidays.

Tokyo’s Nikkei lost 1.2% on caution ahead of impending announcements including Wednesday’s Japan industrial production, Thursday’s China Caixin Purchasing Managers’ Index (PMI) and US non-farm payrolls on Friday.

Pedestrians holding their mobile phone walk past an electronic board showing the various stock prices outside a brokerage in Tokyo, Japan, 9 September, 2015 – REUTERS

“Investors would not take large positions until they digest the outcomes of these key data, so directionless trading is expected this week and volume is likely to be thin,” said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo.

“If these data are better than expected, the market will likely start recovering next week.”

On Friday, the S&P 500 erased an early Federal Reserve-driven rally and closed slightly lower amid a selloff in biotech shares, and the Nasdaq lost 1%. The Dow, however, managed to rise 0.7%.

Fed Chair Janet Yellen last week revived prospects of an interest rate hike before year-end, easing concerns about slowing global growth that helped the dollar and risk assets, which have been buffeted by fears over China’s sputtering economy.

Strong second quarter US GDP data released on Friday further sharpened the case for the Fed to raise rates in 2015.

Focus now turns to this Friday’s US non-farm payrolls as markets try to gauge whether labor market conditions are strong enough for the Fed to tighten monetary policy.

The dollar fetched 120.30 yen after edging up to a two-week high of 121.24 on Friday as US Treasury yields rose on the strong US GDP numbers and expectations of a Fed hike in 2015.

The euro was steady at $1.1184 after shedding 0.3% overnight.

Market activity is seen waning ahead of China’s week-long National Day holidays from Oct. 1.

In commodities, the lackluster mood in equity markets spilled over and US crude oil futures lost 0.8% to $45.31 a barrel while Brent crude lost 0.6% to $48.27 a barrel.

Copper edged higher but was still stuck near one-month lows. Three-month copper on the London Metal Exchange CMCU3 edged up 0.7% to $5,058.00 a ton. Prices hit four-week lows on Thursday near the $5,000-mark and are within reach of a six-year low of $4,855 seen last month.

“The recoveries we’ve seen over the past couple of months, have been pretty short-lived,” said strategist Daniel Hynes of ANZ in Sydney.

“It highlights the increasing cautiousness around China’s growth and what it means for copper despite what the supply side is doing. The PMI will be pretty key this week.”

Gold treaded water after being hit by a stronger dollar. Spot gold was little changed at $1,144.45 an ounce after dropping 0.7% on Friday.

Platinum, drubbed recently on fears demand for the metal used in catalytic converters would diminish in the wake of the Volkswagen emissions scandal, dipped 0.3% to $941.00 an ounce edging back towards the 6-1/2-year low of $924.50 an ounce plumbed last week.