HONG KONG, May 12 — Asian shares fell for a second straight session today as some of the confidence that fuelled a rally in stocks to seven-month highs was undermined by reports highlighting economic weakness.
Sentiment was hit by data showing China’s exports in April fell more steeply than expected from a year earlier, casting fresh doubt on the prospects for recovery in the world’s third largest economy. Imports also dropped.
Hopes of a recovery in China on the back of big government spending had fuelled a surge in equity markets from lows in early March, as investors bet on a turnaround in the global economy.
“Exports are still falling, and the future of the world economy remains uncertain. It’s really hard to be optimistic about China’s trade prospects,” said Qi Jingmei, an economist with the State Information Centre in Beijing.
The MSCI index of Asia-Pacific stocks outside Japan fell as much as 1.9 per cent before trimming losses to about 0.7 per cent.
This is the second session of losses for an index that just today had hit its highest intraday level since early October. Still, it is up about 50 per cent since early March.
Japan’s Nikkei average fell 1.6 per cent, retreating from its highest close in six months today.
The declines come as debate about the outlook for the global economy is confounded by the mixed nature of recent reports.
Optimists pointed to a survey from the Organisation for Economic Co-Operation and Development today that noted the pace of the decline in the world’s major industrialised and emerging economies was easing.
Leading central bankers, including ECB President Jean-Claude Trichet, today also suggested the global economy was turning the corner.
The South Korean central bank forecast mildly positive quarterly growth in coming months for an economy that just skirted a recession in the first quarter, but said risks remained so it would keep an accommodative monetary policy. It left rates at a record low of 2 per cent as widely expected.
However, other reports have not been too rosy. Industrial production in France and Italy dropped more sharply than expected in March, data showed today, in a bad omen for the eurozone economy.
India also reported yesterday that industrial output fell in March more than expected from a year earlier.
In Asia, Shanghai’s main index rose 1.5 per cent on hopes of government aid to the economy. Hong Kong shares rose 0.4 per cent, with HSBC advancing 1.8 per cent after the lender today said first-quarter profits were “well ahead” of last year.
Many other financial shares, including Mitsubishi UFJ Financial Group, dropped following a rally that had tracked gains in US banking shares.
Indian shares soared more than 4 per cent on speculation the alliance led by Bharatiya Janata Party, seen as market friendly, was gaining momentum in national elections. Voting ends tomorrow, but results in the month-long election are only due Saturday.
Taiwan’s main index slumped 3.2 per cent, its worst decline in three weeks, on profit-taking.
Australian shares lost 1.2 per cent while South Korea shed 0.8 per cent.
WHERE TO NEXT?
The dollar’s broad value against a basket of currencies fell to a four-month low in European trade and the euro rose to a seven-week high as optimism the worst of the economic crisis is over boosted oil and share prices in morning European trade.
British data showing a slowdown in the pace of manufacturing decline was the latest economic indicator to bolster the bullish view of the global economy, intensifying the dollar’s weak technical backdrop.
The dollar index fell to a four-month low of 82.271, down 0.7 per cent on the day, while the euro rose around 0.7 per cent to US$1.3677, a level not seen since March 23.
Oil prices rose more than a dollar to a six-month high above $59 a barrel, boosted partly by a weaker dollar. – Reuters
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