Business

Shares fall on US, China growth worries

March 29, 2012

TOKYO, March 29 — Asian shares fell for the second straight day today as concerns about growth prospects in the world’s two largest economies, the United States and China, prompted investors to trim their risk exposure ahead of the end of the quarter.

European equity markets were expected to track Asian markets lower, with financial spreadbetters predicting major European markets to open down 0.1 to 0.3 per cent. US stock futures were steady.

Commodity-linked assets were hurt, with crude oil extending losses and dragging oil-related Chinese shares lower, while weakness in Chinese markets weighed on the Australian dollar due to worries of lower demand from Australia’s single largest export market.

But a weaker Aussie lent some support to shares, making Australian equities the Asian region’s relative outperformer with a 0.2 per cent drop.

MSCI’s broadest index of Asia Pacific shares outside Japan fell 0.9 per cent, retreating from a one-week high hit earlier this week.

Still, the index is set for a quarterly gain of about 11 per cent at current levels, the best showing since the third quarter of 2010 and the best first quarter in 21 years.

Japan’s Nikkei share average slipped 0.9 per cent, moving further away from a one-year high marked on Tuesday, but looked set for its best January-March quarter in 24 years.

The Standard & Poor’s 500 Index was also on track to post its best first quarter in 14 years.

“I think China will see a temporary slowdown, which will trigger monetary and fiscal easing, and overall, the landing of Chinese economy will be soft,” said Dariusz Kowalczyk, senior economist and strategist, Asia ex-Japan, at Credit Agricole CIB.

“But until evidence emerges to support such a scenario, investors will be concerned and this will cap their risk appetite, especially in the run up to the first-quarter GDP,” he said. China is scheduled to release first-quarter gross domestic product data on April 13.

The Shanghai Composite Index fell 1 per cent after posting its worst day since November yesterday with a 2.7 per cent plunge, while Hong Kong shares shed 1.3 per cent.

More earnings are due later today, including Bank of China Ltd, and any disappointing results could further undermine sentiment ahead of the quarter-end.
“With the Chinese stock markets under pressure, the outlook on AUD will unlikely turnaround until we see some confirmation that the Chinese economy is not weakening too much and which should be affirmed by the release of the Chinese PMI (on Sunday),” said analysts at BNP Paribas.

The Australian dollar fell 0.2 per cent to US$1.0370 (RM3.18), well off a one-week high around US$1.0557 reached on Tuesday. The euro edge up 0.1 per cent at US$1.3324.

Oil retreats

Data yesterday showed new orders for US durable goods increased only modestly in February, below analysts’ forecasts, while a gauge of future business investment also fell short of expectations, raising the prospect that economic growth in the first quarter could be lacklustre.

Copper inched up 0.5 per cent to US$8,356 a tonne, recovering from a more than 2 per cent drop yesterday after the durables data raised doubts about the pace of US recovery.

Oil extended the previous day’s losses, after data showed US crude oil inventories posted the largest weekly build since July 2010.

Adding to the downward pressure, France said yesterday it was in talks with the United States and Britain on a possible release of strategic oil stocks to force down oil prices.

A recent spike in oil prices has threatened the global economic recovery and eroded corporate profits.

Brent crude, up more than 15 per cent this quarter, eased 0.1 per cent to US$124.07 per barrel, while US crude futures also shed 0.1 per cent to US$105.30 a barrel.

Weaker equities prompted investors to sell bullion to cover losses while waiting for more clues on the health of the US economy. Spot gold was down 0.2 per cent to US$1,660 (RM5.096) an ounce.

Europe in radar

Investors were reminded of the difficulty in resolving the euro zone’s debt crisis yesterday when European Central Bank Governing Council member Jens Weidmann, who also headsGermany’s Bundesbank, said that raising the firewall around stricken euro zone members would only buy time and end up running into financial and political constraints.

His warning preceded a meeting of European Union economic and financial affairs ministers in Copenhagen tomorrow and Saturday.

“We are particularly bearish on the EUR, as we expect a re-emergence of sovereign concerns, and we also see downside for the AUD and modest weakness for CAD,” Morgan Stanley said in a research note.

sian credit markets weakened, widening the spread on the iTraxx Asia ex-Japan investment-grade index by 4 basis points.

Later in the session, German employment data and US weekly jobless claims report will be released. — Reuters

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