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GLOBAL MARKETS-Asian shares, euro fall; investors wary before ECB, US payrolls

Published: September 5, 2012 | 7:48 am
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* MSCI Asia ex-Japan off 1.2 pct to near 6-week low
* Nikkei hits 4-week low, down 1 pct
* Euro slips but in recent ranges, dollar/yen firm
* Aussie hits fresh six-week low vs USD on China worries
* European shares likely inch higher

TOKYO, Sept 5 (Reuters) – Asian shares slid to near six-week lows and the euro fell on Wednesday, as investors turned edgy ahead of a pivotal European Central Bank meeting on Thursday and U.S. payroll data on Friday.

Investors braced for the possibility that the ECB will act less boldly than they earlier hoped. Still, if the ECB disappoints and the U.S. data is bad, that should boost chances government need to take more action to counter global woes. European equities were seen edging higher, with financial spreadbetters calling London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX to open as much as 0.3 percent higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan tumbled 1.2 percent to a five-week low, with its materials sector by far the worst performer with a 2 percent slump, and dragging resource-rich Australian shares down 0.7 percent to a one-month low.

The pan-Asian index has lost all the gains built since comments in early August by ECB President Mario Draghi that bolstered hopes for decisive action to deal with the three-year-long euro zone debt crisis.

Japan’s Nikkei stock average slid 1.0 percent to a four-week low.

“It’s a correction as we get nearer to Thursday,” said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong. “Hopes for more policy support were sustained during the summer because there were no major deadlines, but now we do have deadlines, and the risk is, there could be some disappointment.”

Cheung said she expects investors to view bad data as pointing to more policy measures aimed at supporting markets.

The euro slipped 0.2 percent but traded within recent ranges at $1.2540, while the dollar inched up 0.1 percent against the yen to 78.45 yen.

“Some investors are wary that the euro’s rally ahead of the ECB meeting will turn out to be, ‘buy the rumour, sell the fact,’ with so many key details of the debt-buying plan still unclear, such as volume,” said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.

Markets expect the ECB to outline its bond-buying programme aimed at containing the yields of highly indebted countries such as Spain to reduce their financing cost.

Some expect the ECB to offer details such as identifying maturities of bonds it intends to buy, most likely two to three years.


Market expectations for additional monetary stimulus from the U.S. Federal Reserve gained momentum after Chairman Ben Bernanke last Friday said the Fed was ready to act if needed.

“The Fed is likely to ease further this month but exactly what options it will take will depend on data. So until we see the jobs report, we can’t push markets either way,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

U.S. manufacturing shrank in August at its sharpest clip in more than three years, as the slowing global economy weighed on the fragile U.S. recovery, while U.S. automakers turned in their best August since before the 2007-09 recession.

That suggested consumers may continue to benefit from low interest rates, helping to support that part of the manufacturing sector, Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. LLC, said in a note.

Friday’s data will likely show 125,000 jobs were added to payrolls in August, while the jobless rate likely held steady at an elevated 8.3 percent, posing a major drag on the economy. The Fed meets on Sept. 12-13.


The growth slowdown in China, the world’s second-largest economy and Australia’s largest market, sent prices falling for key Australian exports such as iron ore. The declines have forced miners to cut capital spending as well as expansion plans, and raised the prospect for Australia to cut interest rates to support growth.

The Australian dollar hit a fresh six-week low around $1.0190.

Steel futures in Shanghai sank to an all-time low of 3,246 yuan on Wednesday while iron ore dipped below $87 a tonne on Tuesday to its lowest since October 2009.

“With what’s happened with commodity prices in the last couple of months, the income story is turning against us in a fairly significant way,” said Michael Blythe, chief economist at the Commonwealth Bank of Australia. “That insulation does look like it’s a little frayed.”

From China, the HSBC services sector Purchasing Managers’ Index fell to 52.0 in August for its slowest pace of growth in a year, following gloomy manufacturing polls earlier in the week.

China, in a bid to boost confidence, has rolled out plans for infrastructure spending this week.

More accommodative monetary policy would boost the appeal of gold as a hedge against future inflation risks. Spot gold eased 0.2 percent to $1,690.51 an ounce, after reaching a six-month high of $1,698.45 on Tuesday.

U.S. crude inched down 0.1 percent to $95.24 a barrel and Brent fell 0.2 percent to $113.96.

Asian credit markets were lacklustre, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by one basis point.


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