 "Asian stock extend losses on weak China PMI survey")
Asian stocks held near the day's lows on Wednesday as a relapse in oil prices and fresh drops in Chinese stocks made sentiment even more fragile before a US Federal Reserve policy statement due later.
Technology giant Apple Inc's forecast of its first revenue drop in 13 years signalled a risk of diminishing corporate profitability and more downgrades.
MSCI's broadest index of Asia-Pacific shares outside Japan was near the day's lows with meagre gains of 0.2%. Australian shares dropped 1.2%.
With Chinese stocks falling more than 3% after a 6.4% tumble in the previous session, Asia failed to draw much support from an overnight bounce on Wall Street led by upbeat earnings results and a bounce in crude oil. US stock futures were pointing to a weaker start.
"There are concerns Apple is reaching the limits of iPhone growth and China won’t make up for a slowdown in the rest of the world," Mark Matthews, head of Asia research and a managing director at Bank Julius Baer & Co. in Singapore wrote in a note.
"Having said that, US stocks are still expensive on the whole. But there are really interesting opportunities elsewhere, in select bombed-out bonds and currencies."
Benchmark indexes fell sharply on Wednesday taking losses over two sessions to nearly 10 % with both the mainland and the Hong Kong stock markets worst performers globally.
Valuations had taken quite a beating. The benchmark Hong Kong stock market index was trading at a price to earnings multiple of 7.4 times, a post 2008 crisis low while the China enterprises index was being quoted at a multiple of less than 6 times, its cheapest since December 2001.
“The Hang Seng China Enterprises index is currently priced for a credit event which we think is slightly extreme," said Michelle Leung, CEO of Xingtai Capital Management, a hedge fund focused on Chinese consumer stocks.
"If we see broad macro data stabilizing in the coming weeks, we should be able to break out of this spiral lower."
Risk appetite was also subdued as crude oil prices resumed falling and ahead of the closely-watched Fed policy meeting outcome later in the day. Correlations between oil and US stocks have risen sharply to 0.9 %.
"With only a short statement, we expect the Fed to repeat that normalization will proceed as data allows in 2016, though markets will be watching for any shift to a more dovish stance," wrote Sean Callow, senior currency strategist at Westpac in Sydney.
Widening credit spreads suggested growing concerns about slowing growth.
Prospects of the two-day Fed meeting concluding with a dovish statement nudged US Treasury yields down. The benchmark 10-year Treasury note yield dipped about 2 basis points overnight. Futures were implying roughly one more rate hike this year, lesser than the Fed's own projections.
US crude surged 3.7 % on Tuesday after OPEC renewed calls for rival producers to cut supply alongside its members.
But the bounce proved fleeting for the volatile commodity, which struck 13-year lows this month as a global economic slowdown, led by China, is expected to curb demand. US crude was last down 1 % at $31.13 a barrel.
Signs of more pain was evident in the credit markets.
Widening credit spreads suggested growing concerns about slowing growth.
Spreads on Asian non-investment grade debt pushed higher in recent days relative to investment grade paper.
Moodys's Investors Service, a ratings agency, said last week the negative pressure on Asian high-yield ratings was increasing this year thanks to limited financial flexibility.
The drop in commodities and the ongoing weakness in stocks burnished gold's appeal with the metal trading at a 12-week high.
In currencies, the dollar held on to gains made against the safe-haven yen following the ebb in risk aversion during the US trading session. The greenback stood a shade higher at 118.26 yen after bouncing overnight from 117.65.
The euro was nearly flat at $1.0862. The Australian dollar dipped 0.1 % to $0.7031.
