Headline shares in the Asia Pacific market closed volatile session lower on Friday, June 07, 2013, as investors await crucial US labor report later today to gauge when a potential rollback of the US quantitative easing begins. The MSCI Asia Pacific Index declined 0.3%.
Market sentiment was weak on uncertainty about how much longer the Federal Reserve will keep providing stimulus to the world's largest economy which has been helping markets rally in recent months.
The likely market reaction to the jobs report is difficult to predict. A tame jobs report could convince investors that the Fed's stimulus program will continue, which could support stocks. But if the figure is too weak, that could raise concerns about an unexpected economic downturn.
Fed Chairman Ben Bernanke has said the US central bank might pull back on its $85 billion-a-month bond-buying program if economic data, especially hiring, improves significantly. Other Fed officials have spoken about a winding down of asset purchases sooner.
Investors were also registering disappointment with the European Central Bank after it failed to fulfill hopes for a dramatic step to spark economic activity in the recession-mired region. The European Central Bank left its benchmark interest rate on hold at a record low 0.5% and left deposit rates at zero, following its monthly meeting on Thursday. ECB President Mario Draghi said the euro zone economy is now likely to contract by 0.6% this year, from the 0.5% contraction forecast in March. However, the central bank revised up its growth forecast for 2014 to 1.1% from 1.0%.
Even though the ECB cut its 2013 growth and inflation forecasts for the 17-country euro currency grouping, Draghi said the governing council felt there was no reason to act now, especially as recent data suggest an improvement in the current gloomy economic conditions.
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Meanwhile, many investors were also trimmed riskier assets before the release of key economic data. China is due to release the May data of its foreign trade, industrial output and CPI in the next two days. Analysts said the data may point to a weaker-than-expected economic growth. The market is cautious before the release of economic data amid uncertainty in case the data miss estimates.
In the Asia Pacific region, Volatility ruled the Tokyo share market with the benchmark Nikkei Stock Average closed at 12877.53, down by 1.7% from intraday peak and 2.6% up from day's low. The benchmark index declined 0.2% from prior day and was down 6.5% from prior week. The Nikkei is still up 24% in 2013. The Nikkei Stock Average temporarily fallen into bear market territory, a 20% fall from a recent high. The three-day losing streak put the benchmark down 19.2% from its May 23 intraday peak
Tokyo stocks displayed whipsaw volatility, as Japanese yen appreciated sharply against the dollar amid anxiety over U.S. jobs data due later in the global trading day and heavy selling in the Nikkei futures were countered optimism that government pension funds will increase their exposure to stocks, news of Soros Fund interest in the market, and even rumors of central bank buying.
The US dollar weakened against the yen ahead of the key payrolls reports in the US later in the day, seen as a key marker of when the US Federal Reserve may taper off its $85-billion-a-month bond-buying program known as quantitative easing. In Tokyo forex trade, the dollar fetched 96.57 yen, weakening from 96.97 yen on Thursday and from intraday high of 97.52 yen. The greenback's weakness on the yen is a negative for the Tokyo stock market as the value of Japan's currency affects exporters' profitability.
Japan's mammoth pension fund said early Friday that it will boost its investment in domestic stocks and overseas assets, while cutting its holdings of domestic bonds, a move that could help support tumbling Tokyo shares and curb the yen's strength but could affect the volatile government debt market. The Government Pension Investment Fund, at a joint news conference with Japan's welfare ministry, said that it has raised its target portfolio allocation of domestic stocks to 12% from the current 11%.
Japan's index of leading economic indicators rose more-than-expected last month, official data showed on Thursday. Cabinet Office said that Japan's index of leading economic indicators rose to a seasonally adjusted 99.3, from 97.9 in the preceding month whose figure was revised up from 97.6.
In Australia, the Australian shares declined for third straight day, dragging the benchmark S&P/ASX200 index down by 0.9% to finish at 4737.70. The benchmark ASX200 has declined 188 points or 3.8% for the week. The benchmark index is now up just 0.67% in 2013. Since hitting its peak of 5220.99 on May 14, the ASX200 has fallen 9.3%. Investors offloaded risk assets amid somewhat jittery ahead of a non-farm payrolls report out later tonight, in addition to the closure of the Aussie market on Monday due to a public holiday. Meanwhile, heavy fluctuations in the Australian dollar also hit investor sentiment. The Australian dollar traded as low as 94.65 US cents, and as high as 95.97 US cents before settling at 95.20.
In Taiwan, shares in the Taiwan market closed mixed with the benchmark Taiex index down by marginal 0.94 point to 8095.20 after official data showed Taiwan's trade balance rose more-than-expected last month. In a report, Ministry of Finance Taiwan said that Taiwanese Trade Balance rose to a seasonally adjusted annual rate of 4.46B, from 2.27B in the preceding month.
In South Korea, shares in the Seoul market declined, weighing the Kospi index 1.48% lower at 1923.85 after Korea National Statistical Office said that South Korean GDP did not change last month following a 0.8% increase in April. The April number was revised down from growth 0.9%. Economists expected a May increase of 0.9%.
In China, the Shanghai-listed shares closed lower, registering seventh session of straight fall on worries about market liquidity and ahead of the release of key economic data this weekend. The Shanghai Composite Index fell 1.4% to 2,210.90 at the close. The Shanghai index has lost 3.9% in the week.
Selloff pressure in the Mainland China triggered on heightening worries about market liquidity squeeze after short-term interbank lending rate surged sharply today. The seven-day repo rate, a gauge of borrowing costs among banks and usually watched as an indicator of liquidity stress, surged to 8%, while the overnight repo rate rose to 8.66%. Meanwhile, many investors were also trimmed riskier assets before the release of key economic data. China is due to release the May data of its foreign trade, industrial output and CPI in the next two days. Analysts said the data may point to a weaker-than-expected economic growth. The market is cautious before the release of economic data amid uncertainty in case the data miss estimates.
In Hong Kong, the HK market retreated, with the Hang Seng Index down by 263.17 points or 1.21% to 21575.26, as cautious investors sold financials, realty and resources stocks ahead of the release of key economic data in the US and China.
In India, the Indian market closed lower after erasing earlier gain, with the barometer index, Sensex, closed lower by 90.26 points, or 0.46%, 19,429.23. Investors sold out stocks of interest sensitive sectors led by realty, PSU and auto ahead of RBI policy review later this month, amid rupee slumping below Rs. 57 against dollar.
India's rupee weakened past 57 per dollar for the first time in almost a year on concern the US Federal Reserve may scale back debt purchases that have fuelled fund flows to emerging markets. Foreign funds bought a net $28 million of local stocks on 5 June, according to data from the market regulator released on Thursday, extending this year's net purchases to $15.3 billion, a record for the period.
Elsewhere, New Zealand's NZSE 50 fell 0.35%. Singapore's Straits Times Index was down 0.28%. Malaysia's KLSE Composite was up 0.34%.
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