Buyers backing off in Asia

Despite a modestly higher closing, near term risks remain well in place

Asian markets managed to end higher but the buying optimism was seen frittering away in the closing moves as the US dollar spiked under 1.2500 mark against the Euro and investors shrugged off the latest rebound on the Wall street due to international tensions. China's president promised more reforms of his country's controversial exchange rate controls but gave no timetable for changing the much-awaited revaluation of the Yuan. This ensured that the tug of war between US and China continues with the former still worried about the flow of cheap Chinese goods flocking he US supermarkets and hurting the American industries. In another potentially worrying development, South Korean President Lee Myung-bak announced suspension of trade ties with the North in response to North Korea's deadly attack on South Korea warship last month.

Both these developments would keep the buying exuberance under check in the coming days given their long-term ramifications. The day started off in a decent fashion for Asia, as the dollar traded above 1.2500 and commodities rallied. This put the Australian markets on a sound track right from the start. Stocks gained around 2%, due to bargain hunting at lower levels, modest gains in oil and commodity prices. The benchmark S&P/ASX200 Index surged up 90.00 points, or 2.09% and closed at 4,395, while the All-Ordinaries Index ended at 4,412, representing a gain of 87.00 points, or 2.09%.

On the economic front, a statement released by the Australian Bureau of Statistics revealed that new vehicle sales in the country climbed a seasonally adjusted 8.4% month-on-month in April to 90,935 units, following a 2.8% drop in March sales. The statement further noted that sales of all types of vehicles increased in April. Passenger vehicle sales increased 7.8%, sports utility vehicle sales were up 16.1% and other vehicle sales rose 1.9%.

The Japanese stock market ended with nominal losses today, coming off their highs on concerns about the continuing strength in Japanese yen against the dollar. Exporters slid lower while banks and miners also slid as the day progressed. The benchmark Nikkei 225 Index fell 26.14 points, or 0.3%, to 9758.4- its lowest closing level since early December. The broader Topix index of all First Section issues rose 0.32 point, or 0.04%, to 880.

On the economic front, a report released by the Ministry of Trade, Economy and Industry revealed that all industry activity in the country dropped for the second month in a row in March. As per the report, all-industry activity declined 0.8% in March following a steeper 2.3% decline in the previous month. Economists expected the activity to decline by 0.7% for the month.

Separately, the report revealed that industrial production in the country rose 1.2% in March, following a 0.6% drop in February. The index of government services moved up 0.6% versus last month's 0.9% drop. Year-on-year, all industry activity grew at a faster pace of 4.7% in March, following 4.1% growth in the previous month.

Chinese stocks continued to witness's strong gains as property developers and banks surged after the recent pounding. Inventors continued to buy these stocks heavily after the benchmark index slumped to its lowest levels in nearly one year last week. The risk appetite was generally good in the early Asian trades and China's Shanghai Composite gained 3.5%. Poly Real Estate closed up 8.9% while China Vanke gained 4.9%. In Hong Kong, China Overseas Land rose 6.1% and China Resources Land added 7.3%.

South Korean stocks edged up marginally in volatile trade. The markets slid lower following the suspension of trade ties with North Korea but recouped these losses by the end. South Korea's Kospi Composite rose 0.3%. However, the Korean won touched an eight-month low against the greenback on concerns about increased tension between North and South Korea.

In Mumbai, markets reversed direction in the late trades as European stocks gave away initial gains and as US index futures fell around 80 points. As per provisional figures, the BSE 30-share Sensex was down 17.16 points or 0.1% to 16,428.45. The Sensex gained 312.12 points at the day's high of 16,757.73 in afternoon trade. The index fell 32.58 points at the day's low of 16.413,03 in late trade. The S&P CNX Nifty was down 2.35 points or 0.05% to 4928.80 as per provisional figures. It came off an intraday high of 5,029.55.

In the other markets, Taiwan's Taiex closed up 1.2% and Singapore's Straits Times Index gained 0.8%. Philippine's PSE Composite and New Zealand's NZX-50 each closed 0.4% higher.

US dollar surged to 1.2359 against the Euro in the London trades. The currency turned higher on safe haven demand as the European equities gave away their initial gains on worries over the Euro zone debt worries escalating. The Spanish central bank's takeover of a savings bank underlined structural problems facing fiscally fragile euro zone states.

In commodities, Light sweet crude oil futures for July delivery slipped from their highs above near $71 a barrel in electronic trading. The commodity topped out at $70.96 per barrel and currently trades at $69.86, down 18 cents from the previous close at $70.04 a barrel in New York on Friday. Gold stayed higher, coming near $1190 per ounce in electronic trades.