* Materials, energy give MSCI Asia ex-Japan worst day in 7
* Talk of hedge fund liquidation shakes risk sentiment
* Gold hits 7-month low, oil and copper extend losses
* Dollar index touches three-month high
* European shares likely to slide
By Chikako Mogi
TOKYO, Feb 21 Most risk assets slid to 2013 lows
on Thursday with sentiment rattled by overnight market talk of
a hedge fund liquidating big positions in commodities, as well
as worries the U.S. Federal Reserve could prematurely wind down
its bond buying programme.
European markets are seen following Asia lower, with
financial spreadbetters predicting London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX would open
down as much as 0.7 percent. U.S. stock futures were down
0.1 percent to suggest a weak Wall Street start.
The possibility of an earlier-than-expected end to the
super-accommodative U.S. monetary easing scheme, which has
underpinned global risk appetite, sparked dollar buying -
pushing it to a three-month high against a basket of currencies
The euro hit a six-week low of $1.3242, while spot
gold extended losses to touch a fresh seven-month low of
London copper struck its lowest in nearly two months
of $7,880 a tonne while crude oil extended losses after posting
its biggest daily fall so far this year on Wednesday.
"Disagreement over the (Fed's) current path is causing
concern for a market that demands certainty," said Ben Taylor,
trader at CMC Markets.
Traders said the selling sparked overnight by the rumours
that a hedge fund was forced to liquidate substantial commodity
positions coincided with the release of the Fed's Jan. 29-30
minutes which showed policymakers discussed the slowing or
stopping of bond purchases aimed at reducing unemployment.
"We all heard the hedge fund rumour and price action
appeared to back such a rumour, but nobody has seen hard news,"
said Yuji Saito, director of foreign exchange at Credit
Agricole in Tokyo.
"The price action also happened at the same time as the
Fed's minutes which suggested the risk of an exit (from
quantitative easing), so it's natural that money which had fled
the dollar was returning, such as from gold. I think the fallout
from the Fed's minutes will continue this session, prompting
some money to head towards the dollar," Saito said.
The MSCI's broadest index of Asia-Pacific shares outside
Japan tumbled 1.8 percent, set for its sharpest
one-day slump in seven months, dragged down by a 3 percent slump
in its materials sector and a 2.4 percent slide
in the energy sector.
The pan-Asian index reached its highest levels since August
2011 on Wednesday.
Resources-reliant Australian shares shed 2.3 percent
for their biggest one-day fall since May as as mining, bank and
energy stocks slumped, a day after they struck a 4-1/2-year
The Australian dollar was down 0.2 percent to
$1.0233 after sliding 1 percent on Wednesday for its sharpest
one-day drop in more than four months.
Hong Kong shares slid 1.8 percent while Shanghai
shares tanked 3.4 percent on worries about Chinese
monetary tightening and the extension of property ownership
Tokyo's Nikkei stock average ended down 1.4 percent,
after closing on Wednesday at its highest since late September
Equities have been rallying since late last year after
excessive pessimism over the euro zone debt crisis and U.S.
fiscal tussle receded as positive growth signs emerged globally,
from China and from debt-battered Europe, boosting investor
The benchmark Standard & Poor's Index scaled its
highest in more than five years earlier this week, while
MSCI's all-country world equity index rose to
its highest level since June 2008 on Wednesday, before
retreating to trade down 0.7 percent after the Fed's minutes.
The minutes showed some Fed officials mulled tapering or
ending the Fed's bond purchases before it saw a substantial
improvement in the labour market.
SIGNS OF NORAMALISATION?
Some analysts saw the markets were ripe for taking profits
after recent strong performances.
"It is not that the Fed decided to end its 'quantitative
easing', but that there was a debate over the policy. But this
served as an excuse for U.S. investors to take profits after
recent Wall Street rallies," said Cho Byeong-hyun, an analyst at
Tong Yang Securities.
Traders said poor performance in commodities, which lagged
other asset classes in 2012 and had seen its peak in 2008 before
the financial crisis, probably made investors wary of talk of a
fund liquidating positions ahead of earnings for the last
quarter, which could be weak.
The Thomson Reuters-Jefferies CRB index, a
bellwether for commodity prices, fell 3.4 percent last year,
extending an 8 percent rout from the previous year. So far this
year the CRB is up 0.5 percent.
"Markets are normalising in the sense that price action and
news are positively correlated, meaning if you think logically,
you will be rewarded," said Goro Ohwada, president and CEO at
Japan-based fund of hedge funds Aino Investment Corp.
"Previously, no action was the best reaction because markets
often priced-in events or news well ahead of time and reacted in
opposite direction after the fact. People are now feeling they
should be proactive and that means more price swings, which is
good for investors," he said.
U.S. crude fell 0.8 percent to $94.45 a barrel while
Brent eased 0.5 percent to $115.07.
"Long position holders have been looking to sell for
profit-taking," said Yusuke Seta, a commodity sales manager at
Newedge Japan. "I guess this is a good time to sell."