Asia manages muted cheer for China growth

Filomena Scalise

Filomena Scalise

Published Jan 20, 2014

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Sydney - Asian markets managed a muted cheer on Monday as China reported economic growth that was a fraction ahead of forecasts, though it was not enough to brighten the general mood of risk aversion.

Most share markets in the region stayed in the red with Tokyo off 0.6 percent, Sydney 0.45 percent and Shanghai 0.2 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan pared its losses but was still down 0.2 percent.

Liquidity was lacking with US markets closed on Monday for a holiday. Neither was there much of a lead from Wall Street where the Dow ended last week with a slim gain of 0.1 percent, while the S&P 500 lost 0.2 percent for the week.

China's annual economic growth slowed a tick to 7.7 percent last quarter, which was just ahead of market forecasts for 7.6 percent and at least countered fears that monetary tightening could have caused a sharper pullback.

“The economy may be a little more robust than people thought coming into 2014,” said Tim Condon, an economist at ING Group in Singapore.

“I had thought the monetary tightening in 2013 would pose a downside risk. The numbers reduce that downside risk.”

The other data out were much in line with foremasts, with retail sales growing 13.6 percent in December from a year earlier, while industrial output rose 9.7 percent.

That resilience was considered a positive for Australia given China is its single biggest export market, and helped the Australian dollar clamber off a three-year trough of $0.8756 to reach $0.8797.

Yet the Australian currency remains out of favour having shed 2.4 percent last week due to disappointing domestic data and demand for US dollars and yen.

In contrast, the US dollar gained 0.9 percent last week against a basket of major currencies on expectations the Federal Reserve will stick with plans to scale back its bond buying at a policy meeting later this month.

The yen had been in demand on Monday as general mood of risk aversion led speculators to cut back on short positions, which has been a very popular trade for months now.

The euro was particularly affected, dropping to a six-week low at one stage before steadying at 140.65 yen. The dollar eased to 103.97 yen from an early 104.32.

The Bank of Japan holds its policy meeting on Tuesday and Wednesday and is expected to maintain its massive asset buying programme.

Deutsche Bank started the week by reporting a surprise pre-tax loss of 1.15 billion euros for the fourth quarter of 2013 due to heavy costs for litigation, restructuring and balance sheet reduction.

The bank was originally scheduled to report its results on January 29, but the Wall Street Journal on Friday reported that a profit warning was possible.

The unexpected loss is likely to compound the problems that have dogged the bank over the past year, especially a lengthening list of lawsuits and regulatory matters, and redouble pressure on co-chief executives Anshu Jain and Juergen Fitschen to prove their turnaround plan is on track.

Deutsche Bank's US-listed shares closed down 3 percent at $52.27 on Friday.

The EU's quarterly earnings season goes up a gear this week. STOXX Europe 600 companies are seen missing consensus by 0.4 percent on revenues and by 0.9 percent on earnings, according to StarMine SmartEstimates, which focuses on the predictions by the most accurate analysts.

In commodity markets, spot gold made an early push to a five-week peak of $1,259.46 an ounce, thanks in part to talk of strong physical demand from Asia.

Brent crude oil for March delivery was off 21 cents at $106.27 a barrel, while US crude fell 59 cents to $93.78. - Reuters

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