Shares steady, growth worries limit gains
TOKYO, Aug 13 (Reuters) - Asian shares steadied today but gains were limited by further evidence of slowing global growth, while the bleaker economic outlook kept hopes alive that authorities around the world will embark on more stimulus measures.
After a deluge of weak data from several countries last week, topped by Friday’s dismal Chinese trade figures, investors will be eyeing July US retail sales and consumer prices as well as the euro zone’s second-quarter gross domestic product reading tomorrow, which is expected to show a contraction.
Fears were growing that the German economy could fall into recession in the second half of this year, crippled by the three-year euro zone debt crisis.
Data today showed Japan’s economy grew 0.3 per cent in April-June from the previous quarter, half as much as expected, and slowing from 1.3 per cent growth in January-March as a rebound in consumer spending started to lose momentum and as Europe’s debt crisis weighed on export demand.
“The latest round of global data releases shows that European activity is the main drag on the global economy at present,” Barclays Capital said in a research note.
“Data across a variety of indicators and regions support our economists’ call that the ECB has more easing to do and our call that the euro should continue to weaken against the USD.”
Sentiment has been underpinned this month by expectations the European Central Bank will start buying sovereign bonds to lower borrowing costs for Spain, and the Federal Reserve will expand its monetary easing. Authorities, however, have suggested no such steps were likely before September.
MSCI’s broadest index of Asia-Pacific shares outside Japan was barely changed after snapping a four-day rally on Friday. But its weekly gain of 2.5 per cent was the largest since January, due to hopes of more vigorous policy action from the central banks of Europe and the United States.
Despite the weak GDP reading, Japan’s Nikkei stock average was flat as traders focused instead on company earnings reports.
“The market is cooling off today but foreigners are still in buying mode, which indicates that momentum is not lost but on temporary hold,” said Park Jung-seop, an analyst at Daishin Securities, of Korean shares, which fell 0.4 per cent,
breaking a five-day winning streak as investors took profits on recent gains.
Australian shares rose 0.5 per cent, pulled higher by a jump in its largest steelmaker Bluescope Steel on plans to sell a huge chunk of its assets to Nippon Steel.
The euro inched up 0.2 per cent to US$1.2297 but capped after failing to sustain its rally to a one-month high of US$1.2444 on August 6.
Oil recovered after falling on Friday on concerns about softening demand from China, with Brent jumping 1.1 per cent to US$114.20 a barrel on renewed fears of supply disruptions in the Middle East, while US crude also rose 0.9 per cent to US$93.67.
Corn eased from an all-time high of US$8.49 per bushel hit early on Friday to trade around US$8.03, weighed by profit taking and a US government survey cutting output and demand outlook.
Risks of a new world food crisis heightened on Friday after a US government report showed domestic and soybean harvests have been hit harder than expected by the worst drought in half a century and will fail to adequately replenish ultra-low stockpiles.
Gold outperformed other metals, with spot gold holding above its 100-day moving average, which currently stood at US$1,608.50 an ounce.
“Compared to other metals, gold has been firm, grinding higher, on mounting expectations for a further quantitative easing (by the Fed),” said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo, noting that markets were keeping their eyes on the annual meeting of economists and central bankers in
Jackson Hole, Wyoming, at the end of the month.
Spot platinum eased 0.1 per cent to US$1,394.74 while spot gold inched up 0.2 per cent to US$1,622.61, bringing the unusual spread between the much more scarce platinum and gold to an all-time high around US$227.9 an ounce.
Copper was down 0.1 per cent at US$7,479.50 a tonne.
Uncertainty over the extent and timing of action by policymakers to address the euro zone debt crisis and deteriorating global growth persisted. But without fresh negative news, investors were likely to keep repositioning from the sharp sell-offs seen before the shaky optimism that emerged this month.
Still, data from EPFR Global showed on Friday that investors pledged the most money to US bond funds in nearly three months in the latest week.
European bond markets remained jittery, with borrowing costs in highly-indebted Spain pinned near critically high levels, putting upward pressure on Italian yields.
Finance Minister Vittorio Grilli said Italy’s government would overshoot its 2012 deficit goal because of worse-than-expected growth but planned no extra budget cuts because Italy was on target to meet its EU obligations, a newspaper reported.
Asian credit markets weakened, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 3 basis points. — Reuters