Reuters - Asia shares were on the defensive Monday as market participants dealt with sky-high valuations and an international economy in the grip of a deep coronavirus-induced recession. Oil prices fell.
Stock indexes in China started lower while shares of Hong Kong-listed Semiconductor Manufacturing International Corp. fell to their lowest since June 16 on fears the company could be added to a U.S. trade blacklist.
China's blue chip index slipped 0.5 percent and Hong Kong's Hang Seng eased 0.2 percent.
Japan's Nikkei fell 0.4 percent with SoftBank shares seeing heavy selling following news reports it had spent at least $4 billion buying call options on listed U.S. technology stocks.
Share prices in Australia, which had opened in the red, reversed losses to edge up 0.1 percent led by miners, while South Korea issues added 0.4 percent.
That left MSCI's broadest index of Asia-Pacific shares outside Japan barely changed after two consecutive days of losses toppled it from a two-and-a-half-year peak last week.
World shares rose to a record last week as central bank stimulus drove asset valuations. The rally has since cooled as stocks of technology companies were sold while worries over patchy economic recovery worried participants.
Monday's main consideration in Asia will be China's exports and imports data for August out later in the morning. China's exports are expected to have posted a second month of solid gains in August as more of its trading partners relaxed coronavirus lockdowns and reopened their economies, a Reuters poll showed.
U.S. stock futures opened in the red, with E-minis for the S&P 500 down 0.3 percent and Nasdaq futures sliding 1.1 percent. U.S. markets will be closed Monday for Labor Day. Nasdaq futures were dragged lower by the exclusion of Tesla from a group of companies that were being added to the S&P 500.
Analysts at Jefferies expect the equities market rethink to extend further. "Our risk indices have begun to turn from their euphoria highs," Jefferies said. "It is not unthinkable that global equities are set to churn in a range for a while as some of the orphan sectors/countries are refranchised while the richly valued sectors pause or unwind," it added. "On the balance of probabilities, last week's correction has further room to go."
Jefferies said it was switching its weighting on MSCI All World index to "tactically bearish" in the short term. It said a gauge of volatility has nudged higher in the past three months alongside a steepening in the U.S. 10-year to five-year Treasury yield curve as well as the 30-year to five-year curve.
"We wonder how much moves in both would upset the equity market," Jefferies said.
Later this week participants will look for data on U.S. inflation with both producer and consumer prices expected to remain mostly steady.
"With slack in the labor market and broader economy to remain for years it's hard to see where sustainably higher inflation will come from," Brown Brothers Harriman said. That said, the bottom line is that U.S. rates will stay lower for longer. Full stop."
In commodities, oil prices dropped more than $1 a barrel - hitting their lowest since July - after Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months. Fading optimism about demand recovery in the coronavirus pandemic also weighed. U.S. crude fell 1.3 percent to $39.24 a barrel. Brent crude fell 1.1 percent to $42.16.
Policy meetings at the Bank of Canada on Wednesday and the European Central Bank the following day are also on investors' radar, with both expected to keep policy steady.
There was little action in the forex market. In currencies, the dollar was flat against the yen at 106.27 ahead of a heavy week of macroeconomic data with figures on household spending, current account and gross domestic product due Tuesday.
The euro held at $1.1838 while the British pound was 0.3 percent weaker at $1.3241 ahead of a new round of Brexit talks with the European Union on Monday.
