Asian markets relinquish recent gains

Seoul, Sydney heads regional losses while Sensex bucks the regional trend

Stock market
in Asian region tramped into negative territory amid concerns about the U.S. economy following weak U.S. private employment and services reports. Profit booking following recent rally and caution ahead of key U.S. jobs report, coupled with lower commodity prices in international market influenced the markets across the region.

On Wall Street, the major indices in New York cut losses in half in the final minutes of trading but still closed lower as stocks took a breather after two days of advances. The Dow Jones Industrial Average fell 65.63 points, or 0.8%, to 8675.24, while the S&P 500 declined 12.98 points, or 1.4%, to 931.76. The Nasdaq gave up 10.88 points, or 0.6%, to 1825.92.

The midweek declines came as ADP reported worse-than-expected private sector unemployment data; Fed Chairman Ben Bernanke urged Congress to mind the deficit; and energy stocks sold off due to inventory build and a dim outlook from Valero Energy.

ADP reported that unemployment in the private sector rose more than expected last month, estimating that the economy shed 532,000 jobs. That's down from an upwardly revised 545,000 in April and more than the 525,000 anticipated.

In the commodity market, crude oil was little changed near $67 a barrel after falling the most in two weeks yesterday as a government report showed that U.S. supplies unexpectedly increased when fuel consumption plunged to a 10-year low.

According to the Energy Department, Crude inventories climbed 2.9 million barrels to 366 million in the week ended 29 May 2009. The gain occurred as imports surged 9.9% and refineries increased operating rates to the highest level in six months. Fuel demand fell to the lowest since May 1999.

Crude oil for July delivery was at $67.19 a barrel, up NT$ 1.07, on the New York Mercantile Exchange at 11:24 a.m. in London. Yesterday, the contract fell $2.43, or 3.5%, to settle at $66.12 a barrel, the biggest decline since 15 May 2009.

Brent crude for July delivery was at $67.20 a barrel, up NT$ 1.32, on London’s ICE Futures Europe exchange at 11:44 a.m. in London. It dropped $2.29, or 3.4%, to end yesterday’s session at $65.88 a barrel, the biggest decline since 20 April 2009.

Gold advanced, paring the biggest decline in almost two months yesterday, as a drop in the dollar increased demand for the metal as an alternative investment. Gold for immediate delivery advanced 0.2% to $967.40 an ounce at 11:24 a.m. in London, trading between $961.92 and $968.85. The metal declined 1.9% yesterday, the largest drop since 6 April 2009.

In the currency market, US dollar pares some of yesterday's gain as finance markets stabilize from yesterday's volatility.

The Japanese yen softened against the greenback on Thursday after Fitch Ratings reiterated its confidence in the U.S. and U.K.’s AAA ratings, damping demand for Japan’s currency as a refuge from the global financial crisis. The Japanese currency quoted at 96.25 per greenback, compared to 96.00 hit late New York Wednesday.

The Hong Kong dollar was trading at HK$ 7.7520 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.

In Sydney trades, the Australian dollar was softening against the greenback on Thursday after weak U.S. economic data triggered a sell-off in commodity-linked currencies. The Aussie was quoted at 80.30 cents against the greenback.

In Wellington trades, kiwi recovered to US 63.75 cents before drifting off to US 62.97 cents towards the end of the day, which compared with US 65.47 cents yesterday. The New Zealand dollar was mixed today after plunging on Wednesday night when investors took profits in higher-yielding but riskier currencies.

The South Korean currency ended at 1,251 won against the greenback, down 17.8 won from Wednesday's close, as foreign investors cut their holdings of Seoul stocks

The Taiwan dollar weakened for the second time in the week. The Taiwan dollar was lost against the US dollar as it was trading lower at NT$ 32.6110, down by NT$ 0.1060 from Wednesday’s close of NT$32.505.

Coming back in equities, most Asian equity markets staged a retreat, with resource stocks leading the fall after an overnight pullback in commodity prices.

In Japan, the stock index dropped, snapping its six days of winning streak, as reasonable amount of profit taking witnessed in the market following reports on a drop in capital spending by Japanese companies in the first quarter, U.S. economy reports raise growth concerns, and looming resistance levels. The Nikkei 225 Stock Average index dropped 72.71 points, or 0.8%, to 9,668.96, while the broader Topix index added 3.51 points, or 0.4% to 911.

On the economic front, Japan’s Finance Ministry announced earlier that Japanese companies drastically cut capital spending by a record of 25.3% in the first quarter ended 31 march from a year earlier as a slump in global demand eroded profits, leaving less money for plant and equipment.

However, the government said there were first signs that worst is over for the world’s second-largest economy, which has been hit by the worst recession since the end of World War II.

In Mainland China, stock market also tumbled snapping four days of winning streak from as investors prompted for profit booking after the China’s said unemployment is worsening, a quick rebound in trade is becoming less likely, and the nation is yet to feel the full effects of a global slump, but the mood remains cautiously positive in the region on further signs an economic recovery are gathering pace.

At the closing bell, the Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, dropped 0.4%, or 11.34 points, to 2,767.24, while the Shenzhen Component Index tumbled added 0.2% or 21.41 points to 10,733.72.

In Hong Kong, the stock market retreated, as commodity stocks and property developers surrendered some of their hefty recent gains after an overnight drop on Wall Street. Energy tumbled as crude oil prices plunged overnight from seven-month highs.

The investors’ sentiments turned fragile after the China’s government said yesterday unemployment is worsening, a quick rebound in trade is becoming less likely, and the nation is yet to feel the full effects of a global slump. However, losses were capped by gains in financials recouped early losses on bottom fishing on expectations that the global economy in the path of recovery.

The Hang Seng Index climbed tumbled 73.7 points, or 0.4%, to 18,502.77, while the Hang Seng China Enterprise Index melted 118.52 points, or 1.09% to 10,706.68.

In Australia, the stock market plunged, snapped four days of winning streak, on tracking negative cues from overseas market, pullback in commodities prices, and the re-emergence of capital raisings concern. Shares of industrials, miners, and materials and resources dragged down the market after pullback in crude oil and metals prices amid concerns over the global economic outlook, meanwhile a falling gold price weighed on gold miners.

At the closing bell, the benchmark S&P/ASX200 index dropped 82.6 points, or 2.06%, to 3,934.6, while the broader All Ordinaries dived 76.80 points, or 1.92%, to 3,932.5.

On the economic front, the Australian Bureau of Statistics reported that the Australia trade balance unexpectedly fell into a seasonally adjusted deficit of A$91 million ($73 million) in April. The deficit was attributed largely to lower exports of coal, iron ore and wheat. Overall exports were down 11% on month to A$21.68 billion. Non-rural goods exports, which include mining output, were down 12%. Imports declined 2.0% to A$21.77 billion.

In New Zealand, benchmark index gave up its three-day winning streak to end in the negative terrain on Thursday. The New Zealand share market was down in the first few minutes of trading this morning, in the wake of tumbling stocks in the United States. At the closing bell, the NZX50 fell by 0.88% or 24.91 points to 2815.71. The NZX 15 was down 0.84% or 43.94 points to close at 5167.86.

In South Korea, stock markets closed 2.6% lower as foreign and institutional investors dumped local stocks amid lingering woes over a global economic recovery. The benchmark Korea Composite Stock Price Index (KOSPI) declined 36.75 points to 1,378.14.

In Singapore, the stocks index dropped, reversing direction as losses in the financials, properties, and manufacturing issues amid profit booking on tracking negative cues from overseas market and pullback in commodities and oil prices. The blue chip Straits Times Index dropped 21.08 points, or 0.88%, to 2,362.74.

In Taiwan, stock market fell further posting their biggest daily percentage drop in about three-weeks, as dismal U.S. economic data dampened hopes for an economic recovery and dented the technology shares. The main Taiex share index declined further, as the Taiex index dumped 107.08 points or 1.55%, closing the day at 6786.06, its weakest finish since 26 May 2009 and the worst single-day percentage drop since 14 May 2009.

In Philippines, the stock market overturned yesterday’s losses closing nearly 1% higher as investor’s sentiments were supported by positive economic news released by the central bank yesterday. Furthermore the investors are looking forward for the May inflation data, which will be released tomorrow. The investor’s are expecting the inflation to ease further, which will provide the monetary boardroom for further domestic policy easing.

The benchmark index PSEi climbed 0.93% or 23.05 points to 2,494.24, while the All Shares index rose 0.57% or 9.23 points to 1,608.02.

On the economic front, demand for money continued to grow in April 2009 as domestic liquidity or M3 rose by 13.7% year-on-year. The expansion in liquidity was fueled mainly by the continued rise in net foreign assets (NFA) at 20.2 % in April, which can be traced to the sustained growth in the net foreign assets of the BSP and the banks at 19.8 % and 22.5 %, respectively. Net foreign assets rose as the BSP continued to build up its international reserves and banks settled a significant portion of their foreign liabilities.

Moreover, the double-digit growth of outstanding loans of commercial banks including reverse repurchase agreements (RRPs) was sustained at 13.4% in April, albeit a deceleration from the previous month’s growth of 18.9%. Preliminary data indicated that loans for production activities continued to lead the credit expansion in April, growing at a faster rate of 18.1% from 16.8% in March.

In India, the market ended in positive territory, bucking the overall trend in the region on expectation of more reforms from the new Government. Key benchmark indices reversed sharp early losses to end with smart gains as investors mopped equities after the newly elected UPA government in its agenda disclosed about reviving economic growth. The barometer BSE Sensex vaulted past the psychological 15,000 mark in late trade. The BSE 30-share Sensex rose 137.78 points, or 0.93%, to 15,008.68. The S&P CNX Nifty shot up 41.95 points, or 0.93%, to 4,572.65.

Elsewhere, Malaysia's Kula Lumpur Composite index was up 0.81% or 8.57 points to 1063.97 while Indonesia’s Jakarta composite index ended the day higher at 2032.72.

In other regional market, European share rose for the first time in three sessions on Thursday, as oil producers staged a turnaround and supermarket groups also advanced.

On a regional level, the U.K. FTSE 100 index rose 0.8% to 4,416.79, the German DAX 30 index climbed 0.7% to 5,089.08 and the French CAC-40 index advanced 0.8% to 3,335.28.

Looking ahead, investor’s focus will turn to the three central bank meetings today, Bank of England, European Central Bank and Bank of Canada; all are expected to leave rates unchanged. Apart from this, we have a retail sales data from Euro zone, which will be followed by Canadian building permits.