No lift-off for Asia Pacific markets

Markets across Asia Pacific were heading down on Wednesday as weak Chinese trade data and a stark warning on the health of the global economy from the International Monetary Fund weighed on stocks.

There was also a weak lead from Wall Street, the S&P 500 having ended a five-session run of gains to close down 1.1 per cent.

The Hang Seng was down 0.7 per cent and the Nikkei was down 1.6 per cent. In China the Shanghai Composite was down 2.3 per cent and the Shenzhen Composite was down 1.5 per cent. Only Sydney’s ASX 200 was up, by a modest 0.2 per cent.

The world faces a growing “risk of economic derailment” and needs immediate action to boost demand said David Lipton, the IMF’s influential second-in-command.

Lingering uncertainty once again sent investors scurrying to the yen, a perceived haven asset, which strengthened as much as 0.3 per cent to Y112.44 against the US dollar in early trading.

With few top-tier economic data releases this week investors are once again looking to centrall banks for a fillip.

“Japan’s economy is struggling to regain momentum and the recent strengthening of the yen is providing a further headwind to efforts to raise inflation,” said Marcel Thieliant at Capital Economics. “The Bank of Japan will therefore have to step up the pace of easing soon – we suspect as early as next week.”

On Thursday, the European Central Bank is expected to announce additional stimulus following months of heavy-handed hints from president Mario Draghi that the central bank is poised to do more to achieve its target of inflation at close to 2 per cent.

Elsewhere in commodities, gold was down 0.5 per cent at $1254.82 an ounce. Brent crude, the global benchmark, was down 0.3 per cent to $39.51 while West Texas Intermediate was down 0.2 per cent to $36.44.

Energy stocks were among the worst performers in Japan and Australia. AWE, the Australian oil and gas exploration group, fell as much as 8.3 per cent to A$0.66 while WorleyParsons was down as much as 5.9 per cent to A$5.58.

In currencies the Australian dollar was 0.3 per cent weaker at A$0.7413.

Meanwhile, the Chinese central bank ended four sessions of strengthening the currency and allowed the renminbi to weaken 0.1 per cent on Wednesday. Every morning the People’s Bank of China sets the “fix” for the currency – the daily midpoint reference rate around which its 2 per cent trading band against the dollar is set. This morning it was set at Rmb6.5106 per dollar. The move was small but and comes a day after the release of dire trade figures on Tuesday.