Asian stocks slumped with oil as a new quarter got under way, with Japanese equities leading losses amid deteriorating corporate sentiment.
After recording its best month since October, an Asian equities benchmark index was headed for its biggest loss in seven weeks Friday. The yen resumed gains amid a flight to haven assets in Japan. China’s stocks reversed earlier gains as the jump in the official factory gauge was overshadowed by a cut in the nation’s credit rating by Standard & Poor’s.
Friday’s data onslaught, which includes manufacturing data for the euro area and the highly-anticipated US payrolls report, will help investors re-calibrate following a quarter of contrasts.
After sliding on concerns about China in the first two months of the year, global equities clawed back most of their losses in March as policy makers around the world signalled they stood ready to bolster flagging growth.
Bets on further US interest-rate increases this year have been scaled back, while anxiety over China’s economy remains despite rebounding factory activity.
“There’s probably some effect from the Tankan,” said Yoshihiro Okumura, a general manager at Chiba-Gin Asset Management Co in Tokyo. “With corporate earnings peaking out, it’s becoming more and more difficult to envision profits this fiscal year.”
Stocks
The MSCI Asia Pacific Index lost 2.3% as of 3.11pm Tokyo time (1.11pm Bangkok time), the biggest decline since Feb 12. The gauge added 8.2% in March, paring back its quarterly loss to 2.3%. Japan’s Topix index slipped a fourth day, tumbling 3.4% as the country’s Tankan surveys of business conditions indicated sentiment among large manufacturers was the weakest since mid-2013.
Australia’s S&P/ASX 200 Index slid 1.6%, falling for the first time in three days after capping its best month since October, and New Zealand’s S&P/NZX 50 Index slipped 0.7%. The Kospi index in Seoul and Hong Kong’s Hang Seng Index lost 1.1%, while Singapore’s Straits Times Index was down 0.8%. The Shanghai Composite Index declined 0.7%, after rising as much as 0.1%.
The official manufacturing purchasing managers index jumped to 50.2 in March, compared with a median estimate of 49.4. A private PMI reading from Caixin Media and Markit Economics rose to 49.7. Readings above 50 signal improving conditions. Seasonal volatility is one factor behind the rebound, according to a government statement, as factories started to run machines again after the lunar new year holiday in February.
S&P cut China’s rating outlook from stable, saying the nation’s economic rebalancing is likely to proceed more slowly than the ratings firm had expected.
The 13% jump in the MSCI index of developing-nation equities last month was accompanied by the lowest trading volume for five years in the markets with the biggest advances and the weakest company profits for six. It last had such strong gains in May 2009, when it declined the following month before resuming a rally in July.
“Basically, it’s profit-taking after a fairly good recovery,” said Geoffrey Ng, director at Fortress Capital Asset Management Sdn in Kuala Lumpur, overseeing about $238 million. “The one-off PMI reading is of course a feel-good factor, but I think investors would want to see more of a trend from now on.”
Futures on the S&P 500 Index fell 0.3%. While the US benchmark’s losses Thursday cut its rally in the quarter to 0.8%, it marked the first time since 1933 the gauge has capped a three-month increase after sliding more than 10% during the period.
Commodities
Oil headed for the first weekly decline since February as Opec output rose and expanding US stockpiles kept inventories at the highest level in more than eight decades.
Crude futures declined 1.2% to $37.88 in New York. The Organization of Petroleum Exporting Countries increased supply by 64,000 barrels to 33.09 million a day in March as Iraqi output gained and Iran pumped at the highest level in almost four years, according to a Bloomberg survey of oil companies, producers and analysts.
US government data Wednesday showed crude supplies rose for a seventh week to the most since 1930.