Asian shares fragile, dollar loses edge on Fed minutes

PetroChina Co. paced losses for energy companies as oil extended its decline from the lowest close in more than six years.

Concerns over fast-falling oil and commodity prices have been exacerbated by turmoil in the Chinese markets, ramping up pressure on resource-exporting emerging nations as well as anyone who trades with the Asian giant. China has moved to weaken its currency to bolster its economy and share prices.

The FTSEuroFirst index of 300 leading European shares fell 0.5 per cent and Germany’s DAX fell 0.6 per cent to its lowest since January, putting it down more than 6 per cent so far this month.

The Vanguard FTSE Emerging Markets Stock Index ETF recently had 28 percent of its assets invested in China, while Blackrock Inc’s iShares MSCI Emerging Markets ETF had 24 percent, even though both are index-following broad emerging markets funds.

Fletcher Building was 1.80 percent off at NZ$7.65 and Spark New Zealand was down 0.90 percent at NZ$2.76.

Fears that Chinese growth, which carried the global economy following the 2008 worldwide financial crisis, is slowing in the long term are affecting the outlook for many industries, with the commodities sector among the hardest-hit.

“The real fear here is China and not so much the Fed, so we could still stay within this trading range”.

US crude oil prices eased 0.8 per cent after a fall of more than 4 per cent on Wednesday following an unexpectedly large increase in US stockpiles, barely holding above its 6 1/2-year low of US$40.40 per barrel. The spectre of a slowdown in China’s economic growth and a US interest rate hike hs hit asset markets in emerging economies hardest.

China’s devaluation “will be something that will shape the rest of the year for emerging-market currencies, especially given the fact that people view this as a clear indication that the Chinese authorities are anxious about the state of their economy”, said Anders Svendsen, an analyst at Nordea Bank in Copenhagen.

In Turkey, the lira plunged to fresh record lows against the dollar, briefly hitting the key 3.0 level after coalition talks than have been running for months, formally collapsed.

The Kazakh tenge plunged to 257 per dollar from around 197 after the central bank scrapped its trading band in another sign of the “currency wars” spreading across emerging markets.

Minutes from last month’s Fed monetary policy meeting showed officials in broad agreement that the U.S. economy was nearing the point where interest rates should move higher.

But they also noted lagging inflation and a weak global economy posed too big a risk to commit to a rates “lift off”.

US Treasury yields fell and money market futures rolled back expectations of a rate raise in September.

Economic data earlier in the day showed US consumer prices rose slightly in July and suggested inflation pressures were stabilizing enough to support a rate hike this year.

The dollar was down 0.7 per cent at 96.38 against a basket of major currencies after hitting a low of 96.359.

In Germany, lawmakers overwhelmingly voted in favour of a third Greek bailout, increasing the likelihood Athens would be able to make a loan repayment to the European Central Bank later this week. Gold also gained, rising to a one-month high of $1,135.40 per ounce.

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