Asian shares, euro ease; China factory output up
TOKYO, April 23 — Asian shares and the euro eased today, but losses were kept in check after a report showed Chinese factory activity stabilising in April, alleviating worries about a sharp deceleration in the world’s second-largest economy.
European shares were also expecting a lower start, with financial spreadbetters predicting that major European markets would open down as much as 0.6 per cent. US stock futures were down 0.2 per cent.
The HSBC Flash Purchasing Managers Index showed China’s factory output ticked higher, new business rose from multi-month lows and export orders perked up, though not sufficiently for a private sector survey of purchasing managers to flag a return to expansionary territory.
The index, the earliest indicator of China’s industrial activity, improved to 49.1 in April from 48.3 in March, but stayed below 50, indicating contracting economic activity.
MSCI’s broadest index of Asia-Pacific shares outside Japan narrowed its loss to a 0.4 per cent fall after the data from a 0.5 per cent drop, while losses in Hong Kong shares also shrank to a fall of 0.5 per cent from a 0.8 per cent drop. Australian shares barely moved, to stand down 0.2 per cent.
China’s PMI lifted the Australian dollar, which is sensitive to data from its biggest export market, to above US$1.0340 from US$1.0335. The Aussie was weighed earlier by an unexpected decline in producer prices last quarter, which set the stage for benign reading of consumer inflation due tomorrow and a cut in interest rates next week.
Japan’s Nikkei average down 0.1 per cent.
“The Chinese PMI was in line with market consensus for a soft landing,” said Tomomichi Akuta, senior energy researcher at Mitsubishi UFJ Research and Consulting in Tokyo. “While growth is slowing, the slowdown has not accelerated sharply, giving some relief to those who had feared for a worse reading.
“This means the impact to commodities prices will be limited as demand will remain lacklustre.”
Copper futures retreated today as investors stayed cautious, down about 1 per cent at US$8,113 a metric tonne. Brent futures held steady around US$118.80, while US crude futures edged down 0.1 per cent to US$103.80 a barrel.
The euro eased 0.2 per cent at US$1.3193, retreating from a two-week high of US$1.3225 hit on Friday.
Market players will now look to the euro zone’s manufacturing activity report due later in the session.
“We also expect euro area PMI to come marginally above consensus today, helping markets keep the positive tone inherited from Friday,” Barclays Capital analysts said in a research note.
IMF firepower boosted
Market sentiment stabilised before the Chinese data, after the International Monetary Fund secured US$430 billion (RM1.3 trillion)to erect a higher firewall in case the euro zone’s debt crisis spreads.
But many see the IMF’s expanded resources as merely buying time, keeping intact markets’ scrutiny over progress in either debt restructuring or growth scenario.
“The increase in the IMF is just a safety net,” said Koji Fukaya, chief currency strategist at Credit Suisse in Tokyo. “That alone is not enough to boost risk assets.”
Market reaction was muted to the result of the first round of the French presidential election yesterday, which showed Socialist presidential candidate Francois Hollande marginally ahead of incumbent President Nicolas Sarkozy.
Some analysts have warned a Sarkozy defeat in the May 6 second-round ballot would weaken the current close cooperation between France and Germany in dealing with the euro zone debt crisis, while others said Hollande, if he won, was unlikely to threaten Europe’s general course for fiscal austerity.
“Sarkozy’s leadership abilities were instrumental in the euro zone’s fight against debt and investors are obviously worried that an absence of this key figure may be detrimental to further progress,” said Oh On-su, an analyst at Hyundai Securities.
Funds seek growth potential
As the world’s leading economies struggle to pick up momentum, investors sought opportunities for growth potential elsewhere.
Indonesia, Southeast Asia’s largest economy, saw a 30.3 per cent surge in foreign direct investment in the first quarter, boosted by an investment-grade credit rating that let it recently issue global bonds with yields lower than some of its emerging peers and troubled euro zone members.
EPFR Global-tracked Europe Equity Funds saw outflows for the fourth week running in mid-April on growing doubts over the ability of European policy makers to contain the euro zone debt crisis as Spanish sovereign debt yields soared, but Japan Equity Funds enjoyed inflows on the prospect of more stimuli from the Bank of Japan, Fund tracker EPFR Global said.
Asian credit markets were cautious, with the spread on the iTraxx Asia ex-Japan investment-grade index widening a tad by 1 basis point. — Reuters