NVDA Q3 Earnings Alert: Why our AI stock picker is still holding Nvidia stockRead More

GLOBAL MARKETS-Asia shares up off 3-mth lows; Aussie hit

Published 02/02/2010, 02:22 AM
Updated 02/02/2010, 02:24 AM
AUD/JPY
-

* Positive factory data drives most stock markets higher

* Aussie hit by surprise c.bank move keeping rates steady

* European shares seen dipping; U.S. stocks also seen soft

* Yen rises against major currencies; euro slides vs USD

By Dean Yates

SINGAPORE, Feb 2 (Reuters) - Resource stocks lifted Asian shares off three-month lows on Tuesday after strong U.S. manufacturing data raised hopes the global economic recovery was on a firmer footing.

But the Australian dollar sank, pulling down the euro, after the country's central bank left interest rates unchanged in a move that stunned markets and underscored investor nervousness about the impact of China's policy tightening. European stocks were set to dip as investors awaited more corporate results and digested the Reserve Bank of Australia's decision to skip an interest rate rise.

U.S. stock futures also pointed to a softer open after Wall Street rose 1.1 percent on Monday on the manufacturing sector data

The RBA, in explaining its decision, cited the impact of higher mortgage rates at home while noting that China had begun to rein back stimulus in its economy -- a tightening process that has transfixed global markets in recent weeks.

Resource-rich Australia has been a major beneficiary of China's sharp rebound and its seemingly insatiable demand for metals and other raw materials.

Investors get nervous when "they feel that in the strongest engine of growth, which is China, there is a little bit of a brake being put on an extremely fast car", said Khiem Do, head of the Asia multi-asset group at Baring Asset Management, which oversees $50 billion.

Japan's Nikkei stock average ended 1.63 percent higher, helped by Toyota Motor Corp, which surged 4.5 percent after it detailed plans on Monday to fix millions of vehicles equipped with faulty accelerators in North America and Europe.

The jump in the world's top automaker comes after about an 18 percent tumble over the last seven business days.

Australian miners were among the best performers in Asia as metals prices rose on prospects for the world economy. Those stocks, as well as retailers bouyed by the RBA's decision to hold interest rates steady, helped Australian stocks rally 1.8 percent.

Asia Pacific stocks outside Japan as measured by MSCI were up 0.22 percent, climbing from 3-month lows. South Korean and Taiwan shares bucked the overall trend, ending down.

MSCI's Asia exJapan resources index was up 1.7 percent, the biggest contributor to the rise in Asian shares.

REACTION TO AUSTRALIA RATE DECISION

The yen rose off earlier lows against major currencies while the Australian dollar slid about a full cent against the dollar in a matter of minutes after the RBA held its key cash rate steady at 3.75 percent, defying market expectations for a rate rise to 4.0 percent.

The sharp reaction in the Australian dollar, a popular high-yielding investment target, spilled over into other major currencies, with the euro initially sliding against the dollar.

"It is a surprise given the pace of domestic data," said Josh Williamson, markets economist at Citi, referring to the RBA decision.

"It seems the RBA has been buoyed by the Chinese authorities seeking to reduce some of their stimulus and the fact there have been lots of market concerns about some sovereigns."

The Aussie dollar shed 1.1 percent against the U.S. dollar to $0.8811, and fell 1 percent against the yen to 79.94 yen

The euro fell to an intraday low near $1.3885 but later trimmed its losses to stand at $1.3928, little changed on the day.

Markets are bracing for a big week with other major central bank meetings across the world and a raft of economic reports out of the United States, culminating in the non-farm payrolls data on Friday.

Baring's Khiem Do said the key to positive economic data driving strong stock markets higher this year would be final demand in the United States, Europe and Japan.

"There is still a big question mark over that, which is why I think we will continue to see volatility in terms of what investors think about their growth prospects for this year," he said, referring to the world's major industrialised regions.

The United States, Europe and Japan have been the slowest to recover from the 2008-2009 global financial crisis and government stimulus measures are still a major factor supporting their economies.

Oil pared gains as the dollar strengthened, with the market's attention turning to forecasts for steady U.S. crude inventories after prices topped $75 earlier on optimism about the economy.

March U.S. crude was up 22 cents at $74.65 at 0640 GMT, after touching $75.44 earlier, a rebound of over $3 from last week's 2010 lows. (Editing by Kim Coghill)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.