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Wellington - Crude fell below $31 a barrel in New York, while Asian stocks outside of Japan erased gains and the yuan jumped in Hong Kong.
Oil dropped for a seventh day after closing at a 12-year low on Monday. The Shanghai Composite Index swung between gains and losses following a $1.4trn rout in 2016. Japanese shares sank as they traded for the first time this week, while the yen climbed 0.2%.
The Chinese currency traded in Hong Kong’s free market rallied as much as 0.7%, erasing its discount to the onshore rate. A Bloomberg gauge of dollar strength was near its highest level since at least 2005 and US index futures retreated.
Concern that turmoil in China’s financial markets will spread to the economy helped spur a selloff in global equities and commodities this year, with crude tumbling 16%. China’s central bank intervened to close the discount to the onshore rate and made it more expensive to borrow and short the currency.
Late-afternoon gains in consumer and technology shares wiped out losses in the Standard & Poor’s 500 Index before Alcoa opened the US earnings season with a better-than- estimated profit and an 18% drop in sales.
The yuan funding squeeze "makes short-selling the currency very expensive overseas," said Eddie Cheung, a Hong Kong-based currency strategist at Standard Chartered. "The onshore- offshore gap will remain narrow in the near-term, given the PBOC’s recent measures to close the difference, but may widen again as depreciation pressure persists."
Stocks
The MSCI’s Asia Pacific excluding Japan measure slipped 0.1%, after gaining as much as 0.8% earlier. The gauge dropped 2% last session to its lowest level in more than four years.
Australia’s S&P/ASX 200 Index fell 0.4% to head for its longest losing streak since 2010. BHP Billiton, the world’s biggest mining company, sank 3% to an 11-year low.
The Shanghai Composite Index rose 0.4% after dropping below the 3 000 level for the first time since September. The gauge sank 5.3% on Monday, extending the world’s biggest selloff this year. The Hang Seng Index gained from its lowest close since 2013. The Philippine benchmark equity index rallied 1.6% after entering a bear market on Monday.
“Another heavy selloff yesterday driven by China concerns means there is the potential for a short-term bounce today,” Angus Nicholson, a market analyst in Melbourne at IG, said in an e-mail to clients.
“There has been a bit of a rally coming into US markets just before the close. The big question is whether this is only a ‘dead-cat bounce’ and traders may just be looking to sell into the rally.”
S&P 500 Index futures dropped 0.4%, after the index ended last session up 0.1% amid volatile trading conditions. The Dow Jones Industrial Average rose 0.3% on Monday to 16 398.57, advancing for the first time in four days.
Currencies
The yuan traded in Hong Kong’s free market rose as much as 0.7%, temporarily erasing a gap with the Shanghai exchange rate that widened to a record 2.9% last week. The cost of borrowing China’s currency overnight in Hong Kong’s interbank market jumped by 53 percentage points to 66.82%, more than five times the previous record reached on Monday. Comparable rates with tenors of up to a year all surged by records to unprecedented levels.
The yen rose to 117.52 per dollar. An indicator of future direction for the yen shows the currency is poised to decline as it has been overbought for five consecutive days, the longest period since 2011.
Commodities
Oil slid 1.5% to $30.95 a barrel after falling yesterday to the lowest level since December 2003. Contracts on Brent crude dropped 1.5% to $31.08 in London. Gold rose 0.3% to $1 097.57 an ounce.
