Asian shares struggle as growth worries linger

Tuesday, 27 March 2012 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Asian shares struggled on Monday, with materials and technology stocks losing ground amid concerns about the impact on profits of a slowdown in the global economy.

Commodity-linked currencies such as the Australian dollar steadied after a hammering last week on worries of easing demand for resources from China, while the euro held near a three-week high.

MSCI’s broadest index of Asia Pacific shares outside Japan dipped 0.2 percent, adding to a 1.6 percent loss last week. Tokyo’s Nikkei share average bucked the trend, firming 0.2 percent, after losing more than 1 percent last week.

“As we approach the earnings preview season, some forecast adjustments could move individual sectors, but the broad market is likely be stuck in this quiet, aimless state until next week,” said Kim Sung-bong, an analyst at Samsung Securities in Seoul.

Commodity markets were mixed, with copper edging up but crude oil losing a little ground.

Equity markets had got off to a flying start in 2012, but have been wobbling since China lowered its growth forecast for the year to 7.5 percent in mid-March, with concerns exacerbated by weak factory data from China and Europe last week.

REBOUND FIZZLES

Wall Street shares edged up on Friday, led by a rebound in resource shares after Chile’s Codelco, the world’s top copper producer, reported a surge in profits and an increase in production.

But the rebound failed to follow through into Asia, where the MSCI Asia ex-Japan’s materials sub-index fell 0.7 percent, while tech stocks fell 0.8 percent.

This year’s equity gains have been driven in part by steadily improving economic data from the United States, and massive injections of liquidity from major central banks.

Japanese stocks have led the way, rising more than 18 percent for the year so far.

“What we’re seeing now is a typical excess liquidity market,” said Kenichi Hirano, operating officer at Tachibana Securities. “The stocks that are gaining here, real estate, financials, iron and steel, these are all ‘bubble’ stocks that rise as a result of easy monetary policy.”

The Australian dollar steadied above $1.0450, after falling well below $1.04 last week on concerns of slowing demand for Australia’s resources from China, Australia’s single biggest export market.

The euro stood at $1.3265, not far from Friday’s three-week high of $1.3293, although some market participants said it could come under pressure later ahead of bond auctions in Spain and Italy.

Rome is looking to raise up to 7.5 billion euros in debt markets amid renewed pressure on peripheral euro zone debt sparked by fears of fiscal slippage.

“Any sign of erosion in restored confidence for these bonds is likely to weigh on the euro,” Barclays Capital analysts wrote in a client note.

In commodity markets, copper rose 0.3 percent to around $8,430 a tonne, while Brent crude oil slipped 0.2 percent to $124.84 a barrel and U.S. crude lost 0.3 percent to $106.57.