Asian shares tumble to 3-week low

File picture: Alex Grimm

File picture: Alex Grimm

Published Jan 6, 2014

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Tokyo - Asian shares fell to a three-week low on Monday after growth in China's services sector slowed sharply last month, raising concerns about the pace of recovery in the world's second-largest economy, while safe-haven gold climbed.

The dollar hovered near a four-week high, supported by an upbeat outlook for the US economy from Federal Reserve Chairman Ben Bernanke that supported expectations of faster stimulus reduction by the US central bank.

British, German and French shares were expected to open steady to modestly softer, according to financial bookmakers.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.8 percent, reaching a three-week low and adding to a 1.1 percent drop on Friday.

The gauge lost 1.7 percent last year, sharply underperforming US, Japanese and European stocks.

China's CSI300 index sagged 2.3 percent, hitting a five-month low after the HSBC/Markit services sector Purchasing Managers' Index fell to 50.9 in December from 52.5 in the previous month, with new business expansion the slowest in six months.

The Chinese index is down 3.9 percent since the start of the year, adding to last year's 7.6 percent decline.

“The focal point of the Asian markets is more on Chinese growth and on Chinese political situation and how it's going to pan out this year, rather than worrying about how tapering will affect Asia specifically,” said Guy Stear, Asian credit and equity strategist at Societe Generale in Hong Kong, referring to the manufacturing PMI released last week.

South Korea's won hit a near six-week low of 1,067.7 to a dollar on China slowdown fears.

Driven by heightened political uncertainty ahead of next month's general election, the Thai baht fell to a near four-year trough of 33.11 per dollar and Thai stocks dropped 1.1 percent after earlier falling by as much as 1.6 percent to touch a 16-month low.

In terms of valuations, Thai equities were relatively expensive, with the 12-month forward price-to-earnings ratio of 11.9, slightly ahead of a five-year average of 11.4 and the MSCI Asia-Pacific ex-Japan's 11.7, Thomson Reuters Datastream data showed.

 

ROUGH START FOR NIKKEI

Japan's Nikkei stumbled 2.4 percent, marking its worst one-day fall in two months, in the first trading day of 2014.

The benchmark jumped 57 percent last year to log its best annual rise since 1972 on the back of massive fiscal and monetary stimulus.

As Japanese equities took a beating, the yen got some respite against the dollar, up 0.6 percent at 104.28 yen, not far from a two-week high of 104.08 yen touched last Friday.

Against a basket of major currencies, the dollar added 0.1 percent to near a four-week high set on Friday, helped by Bernanke's comments.

Bernanke, who steps down as head of the Fed at month's end, gave an upbeat assessment of the US economy in coming quarters, but he tempered the good news in housing, finance and fiscal policies by repeating that the overall recovery “clearly remains incomplete”.

US stocks ended last week slightly weaker, with the Standard & Poor's 500 down 0.5 percent for the week after it jumped 30 percent in 2013.

 

US JOBS, ECB THIS WEEK

Friday's nonfarm payrolls data will give further clues as to how well the US economy is recovering and how fast the Fed will unwind its stimulus campaign, which has been a major driver for global assets in the past few years.

“With the Fed having set the tapering process in motion, it would likely take a fairly significant miss to derail tapering expectations and push yields significantly lower from their year-end levels,” analysts at BNP Paribas wrote in a note.

“Against this backdrop, the dollar is likely to remain generally well-supported this week, particularly versus the lower-yielding G10 currencies,” they added.

Before the jobs report on Friday, investors will focus on the minutes of the Fed's December policy meeting, due out on Jan 8, and the European Central Bank's policy gathering on Thursday.

The euro was down 0.1 percent at $1.3579, building on the pervious session's 0.6 percent decline.

Among commodities, gold advanced 0.4 percent a near three-week high of about $1,241 an ounce, heading for a fifth day of gains. The precious metal suffered a 28 percent slump in 2013, its worst yearly performance since 1981, largely due to the Fed's plan to unwind its stimulus programme.

US crude futures edged up 0.1 percent to just above $94 a barrel, coming off a four-week low set on Friday after data showed a larger-than-expected build in distillates. - Reuters

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