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Asia momentum held back by global economic uncertainty

Yen falls to fresh lows against dollar on BOJ report

Gulf News

Asian shares edged higher on Monday but uncertainty facing the global economy capped prices as a private survey showed Chinese manufacturing contracted this month from two-year highs.

European markets are seen rising, with financial spreadbetters predicting London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX would open as much as 0.4 percent higher. US stock futures were steady to suggest a calm Wall Street start.

Investors remain wary of fragility in the global economic recovery, having pushed markets broadly higher over the past few months as pessimism over the euro zone’s debt crisis and US budget woes receded.

But now markets are wondering whether Italy’s weekend elections will produce a stable government, and the implications of that for euro zone cohesion, while Moody’s credit downgrade on Britain weighed on confidence in the pound.

Testimony on Tuesday from Fed Chairman Ben Bernanke may offer for further clues of when the Fed intends to slow or stop buying bonds: Financial markets were rattled last week by minutes of the Fed’s January meeting showing some Fed officials were mulling scaling back its strong monetary stimulus earlier than expected.

“It’s a waiting game at the moment, with the US Fed chief’s testimony on Tuesday and the outcome of the elections in Italy due to come. We’re not sure if this is the bottom,” said Jackson Wong, Tanrich Securities’ vice-president for equity sales.

China’s HSBC flash purchasing managers’ index (PMI) for February slipped to a four-month low of 50.4 from January’s final reading of 52.3, which had been the best performance since January 2011. The flash PMI, however, did indicate a fourth consecutive month of expansion, even though it just managed to avoid the 50-mark separating expansion from contraction.

Hong Kong shares were up 0.1 per cent and Shanghai shares rose 0.5 per cent, but the PMI news pared early gains.

The MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1 per cent, pulled higher by Australian shares which gained 0.8 per cent on strong financials and retail stocks.

South Korean shares bucked the trend and fell 0.5 per cent, on news that an advocate of aggressive monetary easing was poised to head the Bank of Japan pressured Korean carmakers.

The Nikkei closed up 2.4 per cent at a 53-month high as the yen touched its lowest since May 2010 against the dollar and five-year Japanese government bond yields hit a record low.

“The news of Kuroda (as BOJ nominee) appears to be taken positively by the market, but I think signs of progress towards TPP are vital as it shows Abe is taking leadership in pushing structural reforms, with the TPP being a vital tool to boosting growth,” said Tetsuro Ii, the chief executive of Commons Asset Management.

The yen touched a low of 94.77 against the dollar, while the euro rose to a high of 124.83 yen.

The dollar fell sharply to below 93 yen last week on media reports that Toshiro Muto, a former financial bureaucrat perceived as less willing to take unconventional steps, was the frontrunner candidate for the top BOJ job.