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Asia: Stocks halt selling as US data calm investor nerves
[Tokyo] Asian stocks were tentatively higher on Friday after a solid set of US data calmed turbulence in global financial markets, though underlying worries about slowing world economic growth kept investors on edge.
Japan's Nikkei share average rose 0.3 per cent from a 4 1/2-month low hit the previous day while MSCI's broadest index of Asia-Pacific shares outside Japan put on a similar amount.
Helping calm investor nerves was data overnight showing the number of Americans filing new claims for jobless benefits fell to a 14-year low last week and industrial output rose sharply in September after a fall in the previous month.
The reports prompted a relief bounce in many risk assets that had been battered this week on worries about weakening global growth.
A possible recession in Europe, a floundering economy in Japan, slowdown in China and an outbreak of Ebola virus have all conspired to rattled investors, triggering tumult in financial markets and a bout of volatility not seen in years.
US stocks had another choppy session on Thursday but managed to stay above multi-month lows hit the previous day, with the S&P 500 Index ending flat.
The Volatility index, viewed as a gauge of investor fears, eased to 25.2 per cent from a 2 1/2 year high above 31 per cent hit on Wednesday. "I expect market volatility to gradually to come down. Loss-cutting trades will come to an end soon after a hectic week and markets will be looking to what kind of policy options major countries can adopt now," said Makoto Noji, senior strategist at SMBC Nikko Securities.
Also helping markets were comments from James Bullard, the head of the St. Louis Federal Reserve Bank. Bullard said on Thursday the U.S. central bank may want to keep up its bond buying stimulus for now given a drop in inflation expectations.
However, given US economic data has been broadly solid in recent months, most investors expect the Fed will wrap up its bond buying at the end of this month, as scheduled.
The U.S. dollar also recovered, with the dollar index stabilising at 84.950, off a three-week low of 84.472 hit on Wednesday. "It was largely a cool down session, spiced up by solid US data and a surprisingly dovish comment from Fed member Bullard,"analysts at CitiFx wrote in a note to clients.
The euro gave back some of Wednesday's gains on the greenback to be at US$1.2811, off this week's high of US$1.2887.
The common currency was undermined by a sharp sell-off in periphery euro zone countries debt.
Greek government bonds were the hardest hit, with 10-year yields rising to nearly 9 percent, while Spain missed its target at a bond auction due to weak demand from investors.
The reversal of money flows into these debt markets raises fresh headaches for European policy makers as they struggle to deal with threat of deflation and recession.
Deflation has already hit five peripheral euro zone countries in September, including Italy and Spain, while a string of surprisingly weak German data showed the euro zone's power house is losing momentum.
There is little in the way of market moving data out of Asia on Friday. Later in the day, European Central Bank member Benoit Coeure speaks on 'Have we learnt anything from the crisis' and Federal Reserve Chair Janet Yellen will speak about 'Economic opportunity' at separate events.