Asian shares fell on Thursday, as a weak Chinese trade data stoked fears of a growth slowdown, further undermining risk appetites already reduced by worries about the health of Spanish banks and deepening political chaos in Greece.
MSCI's broadest index of Asia-Pacific shares outside Japan, which has declined the past five days, slipped 0.1% to its lowest in nearly four months. Earlier, it briefly rose as much as 0.5% on strong Australian jobs data that was released before China's April trade figures.
China's exports grew 4.9% in April from a year earlier, data showed on Thursday, weaker than a 8.5% increase forecast and down from March's rise of 8.9%. Annual growth of 0.3% in imports last month also missed expectations for an 11% increase.
"Chinese trade data for April came in surprisingly weak, with both export and import growth disappointing ...indicating weakening external demand and suggesting that strengthening of the yuan in the past few years has undermined China's competitiveness," said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong.
"The poor import number bodes ill for GDP growth. It should be a wake-up call for policymakers to do more to stimulate domestic demand" , he said, adding that weak exports "may convince policymakers to try and prevent any meaningful appreciation of onshore spot."
The Australian dollar initially strengthened on strong jobs data, which scaled back expectations for further aggressive monetary easing. But with the currency sensitive to data from China, the biggest export market, the gains were pared by Beijing's fresh trade numbers.
The Aussie last stood up 0.4% at $1.0079, slipping from an earlier high of $1.0120. On Wednesday, it touched $1.0021, its lowest since December 20.
Australian employment far outpaced expectations by adding 15,500 in April while the unemployment rate surprisingly dipped to 4.9%.
The Australian stock market lost most of its gains to stand nearly flat after rising earlier on buoyancy in miners, which bounced back on upbeat comments from world No. 3 miner Rio Tinto Ltd.
Oil fell as weak Chinese trade data fuelled concerns about demand, sending US crude down 0.4% at $96.38 a barrel and Brent down 0.5% at $112.66 a barrel.
Japan's Nikkei share average fell 0.2%.
Asian credit markets stayed subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index nearly unchanged from overnight.
EUROPE VACUUM FEARED
Global shares slid for a sixth day while safe-haven US and German government debt rose on Wednesday on fears a political vacuum in Greece could put the highly indebted country on course for insolvency and exiting from the euro.
The euro turned around also from an earlier weakness, rising 0.1% at $1.2940. But it hovered near $1.29115 hit on Wednesday, its lowest since January 23, indicating markets remain wary over developments in the euro zone, which have fallen short of convincing investors to be risk-positive.
Spain took over Bankia, the country's fourth-biggest lender, on Wednesday, aiming to dispel concerns over the government's ability to clean up a financial sector severely hit by a property market crash four years ago.
Spanish banks will likely be forced to further boost provisions against ailing loans, and uncertainty over the final tally of banking recapitalisation pushed Spanish yields back above 6% on Wednesday.
Greek politicians will strive to form a government on Thursday to avoid a new election, after voters rejected a bailout deal in Sunday's poll. But prospects looked dim, with seemingly little ground for compromise as parties for and against a bailout were split almost down the middle in the new parliament.
Greece appeared to have averted an imminent funding crisis, however, after the board of the European Financial Stability Facility agreed to a scheduled 5.2 billion euro payment.
"However, it appears that political uncertainty is here to stay, and that, combined with weak economic prospects, should keep market concerns elevated. We remain EUR bears," analysts at Barclays Capital said in a note.
Some analysts caution about a further, sharp acceleration in risk aversion.
"Equity vol indices already show that the market is hesitating to stay in a regime of deep stress," said Sebastien Galy, a strategist at Societe Generale.
"VIX hesitates to move to the 20-30 regime of stress. The battle between better economic data and depressed investor sentiment is yet to reach its final conclusion. Greece only provides the headlines, the EFSF will pay its tranche," he said.
The CBOE Volatility index, a key gauge of how investors perceive risk and measures expected volatility in the Standard & Poor's 500 index over the next 30 days, rose 5.4% to 20.08 on Wednesday. Its rise reflects mounting risk aversion.
While markets broadly took a beating on renewed fears over the euro zone debt crisis, China could defy such bearish mood.
A steady dose of market reform announcements from Chinese authorities, abetted by a pick-up in IPOs and Europe's growing unattractiveness as an investment destination suggest now is as good time as any to position for at least a short-term bounce in China stocks.
