Asian markets struggle, oil losses widen on glut woe

Hong Kong: Most Asian markets slipped Wednesday as traders trod water ahead of a key speech by Federal Reserve boss Janet Yellen this week, while oil suffered fresh losses on persistent glut worries.         

With speculation growing that US interest rates could rise by the end of the year, Yellen's comments at a global central bankers meeting in Jackson Hole Friday will be scoured for forward guidance on US central bank policy.               

There is a chance borrowing costs could rise as soon as next month, analysts say, but most bets are on a move just before the end of the year, or in February.  

"While recent US data has been mixed, the base case for the Fed is probably to increase rates in the absence of any compelling reason not to," Michael McCarthy, chief market strategist in Sydney at CMC Markets, told Bloomberg News.   

"The Fed is aware that there's a substantial risk that if economic conditions deteriorate, they have very little room to move. Given this, the central bank wants to normalise rates as soon as they can."      

The dollar rose against most other currencies, hitting 100.30 yen from 100.23 yen in New York, while the euro eased to $1.1295 from $1.1307. The greenback was also sharply up against high-yielding units including the Australian dollar, South Korean won and Indonesian rupiah.                   

Missile test

On equity markets Tokyo ended 0.6 per cent higher and Sydney edged up 0.1 per cent, helped by a rally in flagship airline Qantas after the firm posted an 80 percent jump in annual net profit and announced a resumption of dividend payments for the first time in seven years.       

But most other markets were lower. Hong Kong lost 0.8 per cent and Shanghai ended 0.1 per cent lower, while Seoul shed 0.3 per cent. There were also losses in Wellington, Manila and Jakarta. In early European trade London and Frankfurt lost 0.6 per cent while Paris shed 0.7 per cent.         

Oil traders were also in retreat, hit by data from industry group the American Petroleum Institute showing a surge in the country's stockpiles. West Texas Intermediate slipped 1.6 per cent to $47.35 and Brent was off 1.3 per cent at $49.33.               

The losses more than wiped out Tuesday's gains that were fuelled by a report saying Iran could support efforts by OPEC and Russia to limit crude output, having previously said it was against the idea.        

The commodity plunged Monday after Iraq said it plans to boost production, while a rebel group in Nigeria called a ceasefire after months of attacking oil installations in the country.     

Another missile test by North Korea that Japan said landed in its air defence zone brought geopolitical tensions back to the fore.        

But Stephen Innes, senior trader at OANDA, said: "With Jackson Hole and monetary policy in both Japan and US taking centre stage we expect limited follow through, but traders will keep an eye out for an escalation of political tension."