Calm returns to Asia markets as stocks stabilise after rally

Calm returned to Asian markets yesterday, with equities stabilising after a two-day rally, as the dollar strengthened on upbeat US economic data.Volatility eased as traders focused on the world economy and corporate earnings after a week dominated by the dramatic spike in tensions over North Korea, which triggered a global sell-off before prices bounced back on Monday.The greenback rose after official figures showed US consumers splurged in July, with retail data spurred by strong auto and department store sales.However, Wall Street finished little changed as the strong statistics were offset by disappointing earnings reports.The Nikkei, which made strong gains Tuesday after finishing at its lowest level for more than three months the previous day, ended marginally down in light trade, even as the weakening yen boosted exporters.Hong Kong gained ground ahead of delayed results from the city’s flag carrier Cathay Pacific.The airline was expected to announce a heavy loss of HK$1.2bn ($153mn) for the first half of the year, according to a Bloomberg survey.Seoul, which was closed Tuesday for a public holiday, also rose by the close of play. “Volatility declined on international markets...with US stock markets returning to their moribund state,” said Ric Spooner, an analyst at CMC Markets in Sydney.“This has provided a neutral lead for the local market where the main focus will be on the profit reporting season.”Shanghai edged lower but traders appeared to shrug off a warning from the IMF on Tuesday that China’s massive debt is on a “dangerous trajectory”, raising the risk of a sharp slowdown in growth.The International Monetary Fund urged the world’s second largest economy to change course and press on with structural reforms, even as it maintained its forecast of 6.7% growth for this year.The US retail sales data increased expectations of a December rate hike by the Federal Reserve, offering more support to the greenback’s recovery after it slumped to eight-week lows under ¥109 at the height of the North Korea crisis last week.“It’s another sign the US economy is on the track the Fed has articulated,” said Greg McKenna, an analyst at AxiTrader.Minutes due later Wednesday from the latest Fed meetings will be scrutinised for clues after policy makers have indicated they may announce plans to reduce the central bank’s balance sheet in September and possibly raise interest rates again this year.On commodities markets, oil was up in afternoon trade after an industry report indicated stronger demand in the US. American Petroleum Institute (API) said US commercial crude stockpiles declined by 9.2mn barrels last week, ahead of US Energy Information Administration data later Wednesday which could further buoy prices.However, lingering concerns remained about oversupply, with US shale oil production expected to remain robust and doubts over compliance with Opec-led output cuts.European stock markets advanced at the start of trading, with London’s benchmark index rising ahead of British jobs data.In Tokyo, the Nikkei 225 closed down 0.1% at 19,729.28 points; Hong Kong — Hang Seng rose 0.9% at 27,409.07 points and Shanghai — Composite fell 0.2% at 3,246.45 points yesterday.