Asia: Stocks struggle for direction as commodities slump continues

Asian stocks closed on a mixed note on Tuesday, as a decline in commodities prices piled further pressure on markets in the region.

Australia’s ASX lost 0.95% after reaching its highest level in about a month on Monday, as a number of base metals traded close to multi-year lows amid concerns over weaker global demand and a stronger dollar.

Nickel hit a new 12-year low before recouping some of the losses, while three-month copper futures on the London Metal Exchange were only marginally higher than Monday’s six-and-a-half-year low.

Commodity-related stocks paced the decline in Australia, with mining giant BHP Billiton and Rio Tinto losing 1.79% and 1.48% respectively, while iron ore producer Fortescue Metals Group slid 3.21% and South32 fell 2.46%.

Meanwhile, Hong Kong’s Hang Seng Index lost 0.35%, dragged lower by a 1% decline in its materials sector.

“Higher US rates and a strong US dollar are always risks for commodity prices more generally, but the anticipated Federal Reserve interest rate tightening cycle has been well telegraphed and the pace of hikes is expected to be slow and gradual,” said Jade Fu, investment manager at Heartwood Investment Management.

“In this environment, we are not expecting that Fed rate hikes will have a detrimental impact on commodity prices.”

Oil prices, however, rebounded after Saudi Arabian officials that they were prepared to work with other OPEC members to bring stability to oil prices.

There was better news elsewhere, as the Shanghai Composite Index rose 0.16%, even though Chinese authorities lifted the ban on new company listings they had imposed during the summer selloff.

Elsewhere, South Korea’s Kospi gained 0.63%, while Japan’s Nikkei advanced 0.23% to close at 19924.89, its highest level since late August.

On the currencies front, the yen gained 0.37% against the dollar, while the Australian dollar rose 0.40% against its US counterpart.

Despite the slight decline against two of the main currencies in the Asia Pacific region, analysts expect the greenback to strengthen further over the next couple of weeks.

“The dollar index achieved a new eight-month high despite bouncing off the potent level of 100.00, as it continues its quest towards a twelve-year high despite concerns over the extent of the interest rate hike predicted for December,” said Farbod Mimeh, junior dealer at London Capital Group.