Image Credit: AFPThe Hong Kong Stock Exchange. The benchmark Hang Seng Index jumped 224.74 points to 21,223.79 in the first minutes of trade yesterday, finally closing 0.7 per cent higher
London: European shares and the euro steadied on Friday, with both on course to end the week down as worries about the euro zone’s crisis strategy, the upcoming US election and slowing global economic growth limit the appeal of riskier assets.
A central bank stimulus-inspired rally that pushed global equities up around 15 per cent since early June has stalled this week as investors wait to see whether yet-to-be-deployed ECB bond purchases can calm the euro zone’s crisis and whether stuttering global growth will revive.
Having enjoyed a 1.2 per cent gain on Thursday, the Euro STOXX 50 index of top European blue-chips had dropped back 0.2 per cent to 2478.57 points by mid-morning, leaving it on course to end the week 1.4 per cent lower.
“With concerns over the state of the global economy coming to the fore this week, along with negative sentiment surrounding a Chinese slowdown, and earnings season and the fiscal cliff garnering negative attention in the US, visibility for equity markets in the short term remains clouded to say the least,” said Daniel Victory at Capital Spreads in London.
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London’s FTSE 100, Frankfurt’s DAX and the CAC in Paris were all in negative territory and MSCI index of global stocks was flat.
Japan’s Nikkei fell to its lowest level in more than two months in Asian trading, while US stock futures pointed to a fractionally higher open on Wall Street where the main focus will be on JP Morgan earnings, the University of Michigan’s preliminary consumer sentiment survey and September PPI data.
Many markets have become stuck in ranges since the start of the month as investors wait to see whether Spain requests a bailout, a prerequisite for the ECB to buys its bonds.
The euro, which has tracked between $1.28 and $1.3070 over the last two weeks was at $1.2974, up 0.4 per cent on the day but down 0.4 per cent week-on-week. The dollar was a tad weaker when measured against a basket of currencies.
With the ECB waiting in the wings, currency strategists think there is limited downside to the single currency at present.
“Negative news from the periphery of Europe is now being viewed as nudging Spain closer to seeking assistance from the EU,” analysts at Morgan Stanley, wrote in a note.
“We believe that EUR/USD has traded a corrective bottom, holding above the 200-day moving average at 1.2825. We now expect a resumption of the recovery trend to start to unfold.”
Following better-than-expected national figures earlier in the week, euro zone data confirmed factory output in the bloc grew much more than forecast in August. It is unlikely to prevent the region sliding back into recession.
German Bund futures tracked gains in US Treasuries, but traders expected another quiet session with no more clarity yet on when Spain will seek a bailout. Ten-year Spanish bond yields were down 3.6 basis points at 5.75 per cent but were within recent ranges.
Next week will be another opportunity for the bloc to make progress with its crisis strategy when EU leaders meet in Brussels on Thursday.
One of the main issues markets hope to be ironed out is the apparent back pedalling by Germany, the Netherlands and Finland on plans to share the cost of recapitalising Spanish banks.
“Once the single supervisory mechanism is established the ESM (euro zone bailout fund) should be rapidly given the possibility to recapitalise banks directly,” Italy’s Prime Minister Mario Monti urged late on Thursday.
Asian stocks rose, with the regional benchmark index headed for its first gain this week, after US jobless claims fell more than estimated and China and Japan agreed to hold talks over a territorial dispute that has disrupted trade between Asia’s biggest economies.
Toyota Motor Corp, a Japanese carmaker whose sales in China slumped last month after rioters torched dealerships in protests over disputed islands, added 1.1 per cent. China Cosco Holdings Co. climbed 8 per cent, leading Chinese shipping companies higher, after rates for hauling commodities rose. Softbank Corp plunged 17 per cent, dragging the Nikkei 225 Stock Average to a fourth day of declines, on talks to invest in loss- making Sprint Nextel Corp
The MSCI Asia Pacific Index gained 0.4 per cent to 120.77 as of 7:36pm in Tokyo, with more than three shares rising for every two that fell. The measure is poised for a 1.5 per cent slide this week, its biggest weekly drop since August, after the International Monetary Fund cut its global growth forecasts and Japanese car sales fell in China. The two countries have agreed to hold talks to reduce tensions.
“It will take a while to fully recover the pre-dispute situation, but at least we’re seeing some gradual improvement in the China-Japan relations,” said Yoji Takeda, who oversees about $1.2 billion as head of Asian equities at RBC Investment Management (Asia) Ltd “As investors see more positive earnings reports, people may start to turn confident. We’re seeing moderate growth in the US and the stock market there has held up quite well.”
The MSCI Asia Pacific Index gained 5.7 per cent this year through yesterday as central banks from Europe to the US and Japan added stimulus measures to counter a global economic slowdown and the European debt crisis. The Asian benchmark traded at 12.7 times estimated earnings on average, compared with 13.7 times for the Standard & Poor’s 500 Index and 12 times for the Stoxx Europe 600 Index.
Singapore’s Straits Times Index climbed 0.4 per cent, erasing losses of 0.2 per cent. The country’s central bank unexpectedly refrained from easing monetary policy even as the economy contracted last quarter, saying inflation will remain elevated for some time.
Hong Kong’s Hang Seng Index advanced 0.7 per cent. China’s Shanghai Composite Index and Australia’s S&P/ASX 200 Index added 0.1 per cent. South Korea’s Kospi Index was little changed.
The BSE India Sensitive Index slid 0.7 per cent as a cut in sales outlook for Infosys Ltd outweighed a report showing the nation’s industrial production rebounded in August.
Infosys Ltd fell 5.4 per cent to 2,395.35 rupees as India’s second-largest software services exporter cut its annual revenue forecast and said higher wages and currency fluctuations will hurt profitability.