Asian stocks slip on profit-taking; oil prices falls

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Asian stocks edged lower on Wednesday as strong U.S housing data overnight increased the chances of an interest rate increase in coming months, prompting some investors to take profits while oil prices slipped after a surprise jump in U.S. inventories.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4 percent in early trade. It has risen more than 14 percent since late June and hit a 1-year high last week, helped by increased interest in emerging markets after a shock vote by Britain to exit the European Union.

According to Institute of International Finance data, emerging market funds have seen net inflows of more than developed market funds in terms of assets under management.

Within the region, Hong Kong stocks slid 0.8 percent on Wednesday as investors sold financials while Japanese markets led gainers, rising 0.6 percent.

While Hong Kong’s benchmark index has rallied 18 percent since late June, on a price-to-earnings basis it still remains around one standard deviation below a 20-year average, indicating investors are not fully convinced about the durability of the gains.

Compounding the anxiety, recent Chinese economic data has been anything but cheerful. Both exports and imports fell more than expected in July and government officials have repeatedly said the economy is facing downward pressure.

However, the pessimism around China has been balanced by growing optimism around emerging markets as some investors such as bond giant PIMCO are slowly turning more bullish, citing a rebound in growth and improving economic fundamentals.

 

In currency markets, the spike in new U.S. home sales pushed the dollar to 94.6 against a trade-weighted basket of currencies after a drop of more than 2 percent ar this month.

The Australian dollar looked set to add to recent gains as Australia’s relatively higher interest rates attracted overseas investors. Oil prices tumbled, reversing early gains, after the American Petroleum Institute (API) reported on Tuesday that U.S. crude inventories rose by a surprising 4.5 million barrels last week.

Brent crude LCOc1 fell 1 percent to $49.46 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 slipped 1.3 percent to $47.48 in early deals.

 

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