Cautious start for Asia

Stocks eke out small to moderate gains but momentum fails to stay outright bullish



Asian shares started the week in a cautious manner today with the positive cues from Friday's US session being countered by a weak undertone in the DOW futures in electronic trading and lower commodity prices. US dollar also rebounded from a seven week lows and political unrest in Japan kept the overall sentiments unsteady even as markets eked out small to moderate gains. Caution ahead of US earnings season kick starting later in the day and lack of economic cues on global economic recovery also kept traders at the sidelines.

There are some worries emerging on the front of continued monetary tightening in Asia and investors also eyed a warning by IMF head Dominique Strauss-Kahn that Asia may face further economic shocks. Strauss-Kahn warned that policy makers needed to "remain attuned to negative shocks" and cited a potential spillover from Europe's debt crisis, the sharp rebound in capital inflows into Asia and the risks of overheating.

Japanese stocks were seen pressed lower after an election setback for the ruling party. The ruling coalition government lost majority in the upper house elections held over the weekend, raising concerns about its ability to push forward various new proposals. The benchmark Nikkei 225 Index slipped to close at 9,548, down 37.21 points, or 0.39%, while the broader Topix index of all First Section issues was down 3.51 points, or 0.41%, to 858.

On the economic front, a statement released by the Bank of Japan revealed that an index measuring prices for domestic corporate goods was down 0.4% in June, compared to the previous month, coming in at 102.9. That was slightly below expectations for a 0.2% monthly decline, following the revised 0.2% increase in May. On an annual basis, corporate goods prices added 0.5% following a revised 0.5% gain in May.

The Australian stocks ended the trading session in positive territory, eking out small gains as upbeat economic data supported the sentiments. Australia's housing loans recorded their first increase in eight months, showing a renascent housing market amid higher rates and falling confidence. The number of home loans issued to borrowers climbed 1.9 per cent in May, seasonally adjusted, according to the Australian Bureau of Statistics. A total of 48,818 loans were made to owner-occupiers in May, after a 1.8 per cent drop in April. The benchmark S&P/ASX200 Index added 13.60 points, or 0.31% and closed at 4,410, breaking above the 4400- points levels while the All-Ordinaries Index ended at 4,429, clocking a gain of 15.00 points, or 0.34%.

China's markets surged by 0.80% to settle at two-week high. Investors continued to price in the much-needed spell of moderation in the economic activity for the world's fastest growing economy. The latest updates from the National Bureau of Statistics suggested that the housing prices in major Chinese cities rose 11.4 percent year on year in June, one percentage point lower than the increase in May. China's yuan stood at 6.7718 per U.S. dollar Monday, a new record high, according to the data released by the China Foreign Exchange Trading System. This pushed up banks and property shares and the Shanghai Composite Index rose to 2,490.7 points, hovering around the tough psychological 2,500-point level.

In Mumbai, the key benchmark indices trimmed gains after extending recovery from lower level in mid-afternoon trade.. The BSE Sensex hit its highest level in more than 3 months and the 50-unit S&P CNX Nifty scaled its highest level in more than 29 months in morning trade, just before a weak industrial production data. The Sensex was up closed up 103.66 points or 0.58% after hitting an intraday high above the watershed 18000 levels.

India's industrial production increased at 11.5% in May from a year earlier, though the pace of rise moderated to the lowest level since November 2009. Factory output rose in double digits for the eighth straight month in May, helped by robust domestic consumer demand, expanding exports, and higher infrastructure spending. Manufacturing production grew 12.3 percent in May from a year earlier, while mining output was up 8.7 percent and electricity generation rose 6.4 percent.

In other markets, Hong Kong's Hang Seng index added 0.6%, Singapore's Strait Times gained 0.30% while TSEC in Taiwan slipped 0.10%.

In the U.S., stocks saw solid gains to close out the week on Friday. Bargain hunting played a role in generating buying interest; helping to drive the major averages higher for a fourth straight session as the dollar fell to a seen week low against the Euro. The Dow added 58.73 points or 0.6% to close at 10,198, the Nasdaq rose 21.05 points or 1% to end at 2,19, and the S&P 500 rose by 7.68 points or 0.7% to 1,078.

Currencies witnessed dollar coming back in vogue as the favored currency in risk aversion. The greenback rose under 1.2600 to top 1.2660 against the Euro. Oil slipped under $76 and extended the losses in quick fire manner with New York's main contract, light sweet crude for delivery in August currently trading at $75.45, down 64 cents from the previous close. Gold also corrected. COMEX Gold slipped on profit sales as sentiments seemed to have been in a limbo after last week's nasty slide to a six and half week low under $1190 per ounce. The benchmark COMEX Gold was last seen quoting at $1204.40, down $5.40 per ounce.