Asian shares weak on growth woes

2012-10-11 07:58

Singapore - Asian shares tracked Wall Street lower on Thursday as weak forecasts from US corporate bellwethers underscored concern over global demand, particularly from China, and kept oil and other commodity prices under pressure.

Chevron Corp issued a profit warning for its third-quarter results, while Alcoa gave an outlook for dwindling aluminum consumption, prompting both shares to fall more than 4%, dragging the S&P 500 to its fourth straight loss overnight.

MSCI's broadest index of Asia Pacific shares outside Japan fell 0.14%, with the materials sub-index shedding 0.5%.

Japan's Nikkei share average seemed set for a third day of losses, falling 0.9% in early trade before clawing some ground back.

The euro remained on the backfoot due to uncertainty over Spain's bailout prospects, with S&P's two-notch sovereign downgrade of Spain dampening sentiment further.

The euro was quoted at $1.2865, just above Wednesday's low of $1.2835, its weakest level since October 1.

"With US stocks falling, and IMF and World Bank raising alarms about the Chinese growth slowdown, market sentiment is against risk - and growth-sensitive or high-yielding currencies are prone to downside risks," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

The International Monetary Fund cut its global growth forecast this week for the second time since April. Ahead of the IMF's twice-yearly meetings in Tokyo, IMF managing director Christine Lagarde said political wrangling added to economic uncertainty, slowing growth in both advanced and emerging economies.

She also prodded the world's rich countries on Thursday to take swifter action as Europe's debt crisis drags on.

"We expect action and we expect courageous and cooperative action on the part of our members," Lagarde told reporters.

So, despite stronger-than expected industrial production numbers from Italy and France, as well as a positive US inventories report, investors chose instead to dwell on Chevron's third quarter warning.

"We think risk assets will perform poorly as long as investors are focused on the third quarter," ING's head of Asian research, Tim Condon, said in a note to clients, while also pointing to improvements in South Korean trade data as a sign things might improve.

Aussie finds support

Australian shares were helped off early lows by data showing a jump in jobs in September, though the unemployment rate rose to a 29-month high.

The Australian dollar also rose a third of a cent against the greenback after the data was released.

Having fallen overnight, oil prices steadied in early Asian trading. US crude futures, which fell over 1%, were up 34 cents to $91.59 while Brent futures climbed toward $115 a barrel as rising tensions in the Middle East stoked supply fears.

"We have a very weak economy so there are worries about oil demand growth while geopolitical issues keep the market supported," said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.

Turkey's warning that it will respond with greater force if there is further cross-border firing from Syrian forces battling rebels near the frontier has added to worries over instability in the Middle East. While mounting tension between Iran and the West over Tehran's disputed nuclear programme have reinforced fears about potential threats to oil supplies from the region.

Spot gold was little changed at $1 763.55 an ounce.

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