Asian shares fell on Thursday reversing two previous sessions of gains on fears about how far US consumers will cut spending, while the euro steadied and sterling dipped ahead of meetings by their respective central banks.
Glum profit forecasts on Wednesday from US food makers and warehouse club Costco added to the uncertainty about reduced consumer spending in a key market for Asian exporters. Kraft and Sara Lee Corp cut their profit forecasts for the year while Costco Wholesale Corp warned quarterly earnings would be well below Wall Street estimates as sales at stores open at least a year fell 2.0% in January.
Another report from the Institute for Supply Management showed that while the US service sector contracted at a less severe rate in January than the previous month the jobs outlook remained grim. Regional bonds edged higher, reflecting the mood of caution, but analysts said some signs of hope remained, largely bolstered by recovery hopes for China.
“Uncertainty about the United States, especially about the government’s ‘bad bank’ plan, is weighing on the market,” said Noritsugu Hirakawa, a strategist at Okasan Securities. “But the fact that China-related shares like shippers and steel are up on hopes for additional Chinese economic steps shows that sentiment isn’t entirely gloomy, and market direction could change.”
The MSCI index of Asia-Pacific stocks outside Japan fell 0.5% as of 0230 GMT, reversing the prior two days of gains. Japan’s Nikkei average fell 0.8%. Indexes in South Korea , Australia and Taiwan posted modest losses, but markets in Shanghai, Hong Kong and Singapore advanced. Oil prices dipped, though gold remained steady.
Asian shippers such as Japan’s Mitsui O.S.K. Lines bucked the early trend rising sharply on a surge in a key indicator of dry bulk shipments. The Baltic Dry Index, which measures changes in the cost of shipping commodities, surged more than 14.6% on Wednesday, on signs of recovering demand for raw materials in China.
A steep decline in economic growth worldwide is being countered by government plans that combine increased spending, reduced taxes and rescues of banks or even industrial sectors. Central banks are also cutting rates steeply. The Bank of England on Thursday was expected to cut already record low interest rates by at least another 50 basis points to 1%.
The European Central Bank is expected to keep its rates on hold at 2% after four months of cuts, but markets are looking for signs of further stops to shore up the euro zone economy.
The euro held steady from late US trading at $1.2828, after falling more than 1.4% on Wednesday. Against the Japanese currency, the euro dipped 0.1% to ¥114.69, while the dollar eased 0.1% to ¥89.42.
Oil prices fell 17 cents to $40.15 a barrel, tracking the decline in global equity markets and hit by a report showing a larger-than-expected build-up in US crude inventories.
Gold edged down after rising in New York on safe haven buying. Gold was trading at $903.55 an ounce. Prices of bullion could reach $1,000 an ounce in the next three months due to its safe-haven appeal, Goldman Sachs said in a report, boosting its forecast from its prior call at $700 an ounce.
But regional bonds, another asset that gains from safety bids, edged higher. Japanese government bond March futures rose 0.12 point to 138.47 after on Wednesday falling as low as 138.28, the lowest since mid-November. (Reuters)