China concerns hit commodities, little collateral damage as yet

SYDNEY Mon Mar 10, 2014 7:43pm EDT

1 of 6. Pedestrians walk past an electronic board showing various stock prices, which are reflected in a polished stone surface, outside a brokerage in Tokyo January 24, 2014.

Credit: Reuters/Yuya Shino

Related Topics

SYDNEY (Reuters) - Asian markets were set for another tense session on Tuesday as worries about China's economy continue to reverberate, taking a particularly hard toll on commodity prices.

February's shock fall in exports from the Asian behemoth has cast a shadow over the global outlook, even as analysts blamed much of the drop on the Lunar New Year holidays.

Oil and industrial commodities bore the brunt of the sell-off. Copper futures shed almost 2 percent on Monday, while spot prices for iron ore .IO62-CNI=SI tumbled over 8 percent.

Brent crude lost 92 cents to $108.08, while U.S. oil extended its decline to $100.94 a barrel.

Investors will be nervously watching Chinese money markets and the yuan for any evidence the People's Bank of China (PBOC) is engineering an easing in monetary conditions after it forced the currency sharply lower on Monday. <TOP/CEN>

Tensions between Russia and Ukraine added to investor unease. In Crimea, unidentified armed men fired in the air as they moved into a Ukrainian naval post. Russia said the United States had spurned an invitation to hold new talks on resolving the crisis. <TOP/NEWS>

Yet, after an initial spill, Wall Street did manage to pare losses. The Dow Jones industrial average .DJI ended off 0.21 percent, while the S&P 500 .SPX lost just 0.05 percent.

That resilience might help steady nerves in Asia, and it was notable that Nikkei futures were only down slightly.

In early trade, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was holding steady, after shedding 1.3 percent on Monday.

Other popular indicators of risk were also muted. The stock market's fear gauge, the CBOE Volatility Index .VIX, ended little changed after an early spike, while U.S. 10-year Treasury yields eased a single basis point to 2.78 percent.

Forex markets were surprisingly calm with the U.S. dollar barely changed against a basket of major currencies .DXY.

Even currencies from major resource exporters incurred only modest losses. The Australian dollar, often used as a liquid proxy for Chinese risk, came off half a U.S. cent but found solid support around $0.9025.

The euro held steady at $1.3876, as was the dollar at 103.26 yen.

Later on Tuesday, the Bank of Japan is expected to reaffirm its commitment to massive monetary stimulus. Nothing new is expected at the policy meeting, but markets suspect the BOJ could be pushed into action once a sales tax increase goes through in April.

The Japanese economy grew at a pedestrian 0.7 percent annualized pace in the last quarter of 2013 as net exports proved a major drag, intensifying pressure for fresh action form the central bank.

The BOJ's decision is due anytime after 0300 GMT, and Governor Haruhiko Kuroda will hold a news conference afterward.

(Editing by John Mair)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (3)
jrj906202 wrote:
The worship of govt,is complete worldwide.This means all central banks will create whatever fiat currency is necessary to inflate their economies.It will cause phony recoveries,based on inflation,but if these govts are successful in convincing the masses that inflation is non existent,they can create the image of real growth.

Mar 10, 2014 11:40am EDT  --  Report as abuse
carlmartel wrote:
The US did not sell enough for Christmas and afterwards to need as many replacement products. We started this Christmas season with 1 less shopping weekend and lost 5 of 6 to ice and snow. Bad weather continued into March and hit the EU and China, so China has fewer orders and its own weather related production problems. US ice and snow in the northeast should continue to mid-March, so April should have no weather problems but won’t appear in reports until May.

Mar 10, 2014 12:23pm EDT  --  Report as abuse
toonik_ph wrote:
worth reading article and

Medivation, Inc. is down 15% since we reported $2,809,721 of insider selling on 02/12/2014. Did you sell or did you buy more? Full story here..

Mar 10, 2014 12:46pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Track China's Leaders