Asian markets end mixed

Tentative signs of correction as risk appetite wanes, Yen surges

Asian markets witnessed some selling pressure at elevated levels as risk aversion took effect and the recent enthusiasm waned. The market participants failed to buy in the prospects of the US Fed keeping the interest rates too low for too long, as quoted by the Fed Chairman Ben Bernanke yesterday. Though China, Malaysia and New Zealand ended with decent gains, the sentiments seemed to have turned from modestly upbeat to intensely cautious, with the DOWJONES futures showing moderate selling pressure.

Yesterday, Federal Reserve chairman presented the bank's semi-annual monetary policy report to Congress. Bernanke noted that pace of the economic decline in the United States has slowed down significantly, signifying that that the worst of the financial crisis may be behind us. “The final demand of production has shown tentative signs of stabilization,” he said but added that the labour market continues to weaken. “Job insecurities together with declines on the home values and tight credit is likely to limit gains in consumer spending,” Bernanke said. “The possibility that recent stabilization in household spending will prove transient is an important downside risk to the outlook.”

However, Bernanke failed to account for the fact that the rising mortgage rates, which typically track the movements in the long term treasury yields, have all the essential ingredients of a becoming a recipe to undone the fragile housing market recovery.

Asian markets started on a broadly optimistic note following this background. Bank Of Japan deputy governor noted today that economic conditions in Japan have recently begun to stop worsening. However, the central bank expects the upward pressure to outweigh the downward, leading the economy to start recovering from the latter half of fiscal 2009. The Nikkei 225 average ended up 0.74% on the day.

China ended with strong gains with blue chips coming back in the fore after yesterday's debacle. Chinese equities slipped Tuesday after hitting a 13-month high Monday, posting the biggest one-day decline since June 12. However, the latest rebound offers credence to the view that the world's fastest growing economy is slowly entering into a safe territory, visible nonchalant to the customary gyrations in the world environment. In other markets, Malaysia and New Zealand ended with gains of around 1%.

Indian equities were hit hard today with the benchmark BSESENSEX sliding by more than 200 points or 1.50% as investors locked in gains, reflecting that rallies over the magical 15k mark are still being considered as a selling opportunity to cover previous longs. In other major losers, Hang Seng and Jakarta Composite shed 1.30% and 1% respectively.

Commodities were under hammer as crude oil shed more than 1 dollar ahead of the weekly US inventories data. Gold also corrected a bit with some selling emerging after the metal rallied to $950 per ounce mark in the current week. In currencies, Yen continued to appreciate against the US dollar, hitting 93.25- one-week high levels. Dollar itself hold steady against the Euro, consolidating around 1.4200 levels.