Risk assets rebound but high volatility persists

Reuters News
Posted: Sep 02, 2015 8:39 PM

By Hideyuki Sano

TOKYO (Reuters) - The price of shares and other risk assets staged a tentative recovery in early Asian trade on Thursday though volatility remained high as investors fretted over global economic health.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.3 percent, hovering about 2.8 percent above the three-year low hit last week, while Japan's Nikkei <.N225> gained 1.4 percent.

The rally came as Wall Street stocks jumped almost 2 percent on Wednesday, which traders see as a natural move after big falls. Despite Wednesday's rebound, shares have only pared about half of the losses seen earlier in the week.

Also helping to boost the market, Apple <AAPL.O>, the world's largest company by market capitalization, jumped more than 4 percent, in anticipation of its Sept 9 media event where it is expected to unveil new iPhones and potentially a new version of its Apple TV set-top box.

In addition, sentiment was helped by a rebound in Chinese shares on Wednesday after several leading Chinese brokerages said that they will increase the size of their proprietary stock trading - answering Beijing's call for listed firms to bolster their backing for struggling stock markets.

Asian traders will be spared, at least for now, keeping an eye on wild swings in Chinese share markets, which are closed for a holiday on Thursday.

Yet investors still expect choppy trade ahead, with CBOE Volatility index <.VIX> still at 26 percent, about twice as high as its usual levels around 12 to 16 percent.

A similar gauge for Japanese share market, the Nikkei volatility index <.JNIV>, stood at 37 percent.

"The fact that the volatility index is staying at a such high level points to unstable markets down the road. We may need clearer signs of stabilization in China," said Takeru Ogihara, chief strategist at Mizuho Trust Bank.

Oil prices remained volatile after their 25 percent surge late last month.

Brent crude <LCOc1> traded at $50.48 per barrel, having traded in an unusually wide range between $42.23 and $54.32 since late August.

In the currency market, the dollar rose against the yen and the euro in line with recovery in global share prices.

The euro traded at $1.1216 <EUR=>, down from this week's high of $1.1332 while the yen traded at 120.65 to the dollar <JPY=>, compared to Tuesday's one-week high of 119.225 per dollar.

On the other hand many emerging market currencies remained under pressure, hit by a double-whammy of slowing growth in China and the prospect of higher U.S. interest rates.

The Brazilian real <BRL=> tumbled to its weakest level since 2002 on Wednesday as expectations of a growing fiscal deficit fed fears that Brazil would lose its investment-grade credit rating.

Emerging market currencies could face more pressure if Friday's U.S. payrolls data boost expectations that the U.S. Federal Reserve is on course to raise interest rates later this year.

On Wednesday, U.S payroll processor ADP reported that private payrolls increased 190,000 last month. While that was below economists' expectations for a gain of 201,000 jobs, it was a step up from the 177,000 positions created in July.

(Reporting by Hideyuki Sano; Editing by Eric Meijer)