Asia stocks rise amid caution over euro debt, U.S. data

Thursday, 19 May 2011 00:00 -     - {{hitsCtrl.values.hits}}

(Reuters) - Asia shares rose from a six-week-low on Wednesday, led by consumer stocks, but disappointing U.S. data have made some investors reluctant to follow commodity prices higher, containing a bounce in risky assets from currencies to oil.

Japan’s benchmark Nikkei average was up 0.84 percent and MSCI’s index of Asia Pacific shares outside Japan rose 0.89 percent. Korea stocks rose 1.25 percent, lifted by automakers and shipbuilders.

The main Wall Street indices ended flat to 0.6 percent lower after falling as much as 1 percent weighed by soft economic data, including a slump in home building, and a lower outlook from tech heavyweight Hewlett-Packard Co.

U.S. factory output slipped for the first time in 10 months in April as a shortage of parts from Japan crimped activity and home building slumped, showing the economy got off to a weak start in the second quarter.

Signs of lackluster economic activity were also evident in declining sales at Wal-Mart Stores, a cut in 2011 profit forecast by Hewlett-Packard.

“As long as investors remain jittery about U.S. economic growth, investment in Japanese manufacturers may be subdued,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.

London copper firmed on Wednesday, but analysts said gains may be capped as disappointing U.S. data raised more doubts about the global economic recovery.

But amid the U.S. slowdown, the state of the housing market, a big copper user, comes as no surprise, especially after tornadoes lashed parts of the country last month. Home construction accounts for about 2.2 percent of U.S. GDP.

The euro was steady against the dollar and the yen after recovering from recent lows, but wariness over sovereign debt problems in Europe made investors nervous about piling up euro positions, although traders said signs of clarity in the issue may prompt some buying back of the single unit.

“I feel that the euro-zone debt issue has stabilised slightly for the near term after European finance ministers approved a loan scheme for Portugal, prompting buying back of the euro,” said Teppei Ino, a currency analyst at Bank of Tokyo-Mitsubishi UFJ.

Europe’s top financial officials broke a taboo on Tuesday and acknowledged for the first time that Greece may have to restructure its debts, a move which could stoke Europe’s sovereign debt crisis.

The U.S. dollar index, a measure of the U.S. dollar against a basket of currencies, was off 0.23 percent.

Gold rose to $1,490, after falling for three straight sessions. Again, worries about the euro zone’s debt crisis lent support, despite news this week that billionaire financier George Soros dumped almost his entire $800 million stake in bullion investment in the first quarter.

U.S. crude futures bounced back after ending at a 12-week low following industry data that showed a surprise drop in U.S. product inventories.

London Brent crude for July delivery was up 69 cents at $110.68 a barrel, after settling down 85 cents.

NYMEX crude for June delivery was up 86 cents at $97.77 a barrel, after rising to as high as $98.00 earlier.


Gold gains after 3-day drop on Asian buying

Gold rose on Wednesday as Asian buyers snapped up bullion after a three-day losing streak, taking the cue from a weaker dollar, with the ongoing euro zone debt crisis also supporting sentiment.      

The dollar slipped 0.3 percent against a basket of currencies while the euro ticked higher but remained on shaky ground on worries about sovereign debt crisis in the euro zone, after top European financial officials acknowledged that Greece may have to restructure its debt.

“The slightly weaker dollar and some bargain hunting are helping gold’s rebound,” said a Hong Kong-based dealer. “But the market does not have a clear sense of direction and a lot of people are just waiting.”      

The premium on gold bars in Hong Kong increased 10 cents this week to between $1.30 and $1.80 per ounce over London spot prices as buying picked up, he said. Scrap selling was still muted, he added.     

Spot gold gained 0.4 percent to $1,490.99 an ounce by 0425 GMT. US gold rose 0.8 percent to $1,491.10.

The technical outlook for bullion remains bearish for the short term. Spot gold is expected to continue its fall towards $1,456 an ounce, said Reuters market analyst Wang Tao.

“Gold can face more downside pressure technically, if prices break below the 50-day moving average at about $1,470,” said Ong Yi Ling, an analyst at Phillip Futures.

The long-term outlook for bullion still looks bright, and expectations that Greece will restructure its debt may drive some investors to seek safe haven in gold, she said.

Spot silver rose 1.3 percent to $34.36 an ounce. US silver climbed more than 2 percent to $34.37.

Spot silver hit an all-time high at $49.51 in late April, buoyed by strong investment demand. But prices have fallen more than 30 percent since as successive margin hikes in COMEX silver futures which nearly doubled trading costs drove investors away. - Reuters