Asian shares inch down, mark time before Jackson Hole

Reuters: Asian shares edged down in choppy trade, while gold and oil rose on Monday, encouraged by a fresh report of a potential framework for the European Central Bank’s new bond buying scheme, as well as hopes of a strong easing from the Federal Reserve.

Growing hopes for more accommodative monetary stance around the world helped gold break a key resistance last week, which had held for months. Spot gold hit a fresh 4-1/2 month high of $1,676.45 an ounce on Monday, while spot silver hit a near four-month high of $31.17 an ounce.

Oil futures gained more than $1 on supply concerns on Monday, with US crude up 1.6 per cent to $97.69 a barrel and Brent up 1.6 per cent to $115.38.

“Commodities which are highly sensitive to monetary policy easing are underpinned by such speculation, so it’s hard to sell in markets such as gold, silver and oil where it’s easier for speculative money to flow in,” said Bob Takai, general manager of Sumitomo Corp’s energy division.

MSCI’s broadest index of Asia-Pacific shares outside Japan was off 0.2 per cent in choppy trade. Seoul shares fell 0.3 per cent, dragged lower by a plunge in Samsung Electronics (005930.KS) after a US jury found it had copied critical features of Apple (AAPL.O).

Australian shares rose 0.3 per cent, supported by gains in the mining and banking sectors on stimulus hopes, while Japan’s Nikkei stock average gained 0.3 per cent.

Central bank sources told Reuters on Friday that the ECB is considering setting yield band targets under the bond-buying programme to shield its strategy from speculators, but the decision would not be made before its September 6 policy meeting.

There is a dearth of major economic data in Asia on Monday, meaning the market’s focus in the short-term will remain fixed on Europe, with longer-term focus on the annual US Jackson Hole meeting of central bankers and economists later this week.

Fed Chairman Ben Bernanke said “there is scope for further action by the Fed to ease financial conditions” in a letter he sent to a US House panel, reinforcing market’s persistent views the Fed would soon implement a third round of quantitative easing, known as QE3.

Traders will be seeking clues from Bernanke’s speech at the Jackson Hole, Wyoming, gathering ahead of the Fed’s September 12-13 policy meeting. Bernanke has used the Jackson Hole event the previous two years to flag the Fed’s intention on more easing.

Bernanke is due to speak on Friday and ECB President Mario Draghi will take the podium on Saturday.

“We expect Bernanke to clearly signal that Q3 is in the pipeline and our expectation remains that this will be delivered at the 12-13 September FOMC,” Societe Generale said in a note.

“A dovish tone from Bernanke should bring some re-assurance to markets,” it said, adding that the ECB will not help shore up sentiment much. “While the ECB has answered the question of how more risk sharing can take shape, they are not writing any blank checks. Conditionality is here to stay, and with it so too is sovereign risk until the conditionality is fulfilled,” it said.

Analysts have said the ECB’s plans to buy government debt to reduce borrowing costs of stricken euro zone states will help soothe market jitters, but it does not resolve the fundamental issue of strengthening the fiscal foundation of the euro zone.

Greece remains a risk trigger for reversing the current moderately improved sentiment towards Europe.

German Chancellor Angela Merkel has said Germany would await a report by global lenders assessing the country’s performance on its reform targets next month.

Merkel reiterated that she and French leader Francois Hollande wanted Greece to remain in the euro zone but that it must meet its reform targets, while Germany’s finance minister reaffirmed on Saturday his opposition to giving Athens more time to carry out promised reforms.

With the euro zone’s fiscal woes taking a deeper toll on the global economy, Chinese premier Wen Jiabao said on Saturday that China will implement new measures aimed at stabilising export growth in the third quarter.

Data from the Commodity Futures Trading Commission on Friday showed that money managers, including hedge funds and other large speculators, boosted their bullish bets in US gold futures and options to the largest amount since early May.

Gold posted its biggest weekly gain since January on Friday.

Investors also kept paring positions betting on the euro’s fall last week, while positions in favour of the US dollar declined further to the lowest in nearly a year, the CFTC said.

The euro steadied at $1.2513, off Friday’s low of $1.2481.