Most Asian shares fell on Friday as concerns over the global economy and caution ahead of a Bank of Japan rate decision halted a powerful three-day rally, sending safer havens such as regional bonds and the yen higher.
Regional shares were set to end October as their worst month on record -- worse even than during the Asian financial crisis a decade ago -- as global economies buckle under the weight of the biggest financial crisis since the Great Depression. Policy makers have responded by cutting interest rates and injecting liquidity, but investors fear the measures may only have a temporary effect in what could be a severe and long-lasting global recession.
Oil prices dropped more than $1 a barrel on Friday after data showed the US economy suffered its sharpest contraction in seven years in the Q3, as consumers cut spending and businesses reduced investment. Though the decline was less than expected, it bodes ill for export-dependent Asian economies, analysts said. “It was still weak and the consumption contribution fell sharply suggesting bad news for Asian exports and regional growth going forward, especially as the US economy is set to register even bigger declines over coming quarters,” Calyon analysts wrote in a note to clients about the US economic growth data.
The MSCI index of Asian stocks outside Japan was down 1.1% at 2:50 a.m. British time, stemming a 19% rise over the past three sessions, a gain powerful enough to put the index on course for its biggest weekly gain on record. But the index was still down some 25% for the month, highlighting the severe falls seen throughout Asia. Japan’s Nikkei this month hit a 26-year low. Nervousness about whether the Bank of Japan will follow the US Federal Reserve and other regional central banks in cutting interest rates prevailed, sending the Nikkei down 2.7%. Concerns about global growth and profit-taking sent other indexes lower, with Hong Kong down 3.9%, while Shanghai and Sydney shed just over 1%.
Commodities, which are sensitive to global demand, have also been routed this month. US crude futures slumped $1.4 to $64.55 a barrel, less than half the record near $150 it had hit in July. Platinum dropped to $783 an ounce, down from the notional New York close of $817. The metal had hit a life-time high of $2,290 in March.
But the yen rose against the euro and the dollar, supported as investors unwind investments in risky assets that had been funded by borrowing the low-yielding yen. The dollar eased 0.2% against the yen to ¥98.40, while the euro fell 1.1% against the yen to ¥125.87. Other safe-haven assets gained as well, with Japanese government December futures up 0.40 point to 138.31. (Reuters)