Asian stocks stumbled to three-week lows and U.S. stock futures and Treasury yields fell after China’s September trade data showed a sharp decline in exports, raising fresh concerns about the health of the world’’ second biggest economy.
Risky assets have had a torrid start to the final quarter of 2016 after recent outperformance as concerns around the outcome of US elections, fallout from a “hard Brexit” and a struggling German banking sector spread turmoil in markets.
Early on Thursday, the mood soured after data showed Chinese imports in dollar terms were back in contractionary territory in September while exports dropped by a sharper-than-expected 10 per cent.
The weak trade data fuelled a broader-risk off move. Some analysts said the soft data also raised concerns that China may pursue a weaker currency policy in the coming months, stoking deflationary pressures for the rest of the region at a time when corporate earnings’ growth has slowed.
“The continued underwhelming performance of Chinese exports adds weight to our view that the People's Bank will maintain its recent policy of gradual trade-weighted renminbi depreciation in coming quarters,” economists at Capital Economics wrote in a note.
Asia-Pacific shares
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1 per cent, its lowest since September 19. Hong Kong stocks fell 1.5 per cent in opening trades while Japanese shares were down 0.4 per cent.
“The China data has exacerbated the broad cautious mood and we should see more gains for the yen and other safe-haven assets,” said a currency trader at an Asian bank in Hong Kong.
Ten-year yields on US Treasury debt fell five basis points to 1.74 per cent, a relatively large move in the Asian timezone, while U.. stock futures deepened losses to be down 0.6 per cent on the day.
Despite the broad pullback in US Treasury yields, markets were relatively more confident in the view of a likely rate increase in December.
“In our view, if you came into these minutes with a December hike pencilled in, there is no reason to change your stance," Omair Sharif, an economist at Societe Generale, wrote in a note.
Wall Street struggled to find fresh momentum after breaking conclusively below a 100-day moving average this week. The Dow Jones industrial average closed up 0.09 per cent, while the S&P 500 gained 0.11 percent.
The CBOE Volatility Index, the “fear gauge” of near-term investor anxiety, held just below 16, indicating broader market uncertainty.
Elsewhere, sterling treaded water after British Prime Minister Theresa May’s offer to give UK lawmakers a say in plans to leave the European Union.
King Bhumibol Adulyadej’s health
Within Asia, the Thai baht will be in focus after falling to an eight-month low in the previous session on concerns about the health of 88-year-old King Bhumibol Adulyadej. The health of the world's longest reigning monarch has “overall not yet stabilised", the palace had said.
Oil prices struggled following a 1 per cent drop overnight after the Organization of Petroleum Exporting Countries reported its output hit an eight-year high in September, offsetting optimism over the group's pledge to restrict output.
US West Texas Intermediate crude slipped 1.1 per cent to trade at $49.62 a barrel. Gold stabilised around the $1,250 per ounce level after falling sharply last week.