Asia: Shares slip on lacklustre data, dollar strong

[HONG KONG] Asian shares dipped on Thursday following Wall Street's decline overnight and lacklustre regional data while the greenback consolidated gains on the back of upbeat US economic news.

South Korea's economy recorded its weakest expansion in six years in the second quarter, battered by a deadly virus outbreak and poor exports, while Japan reported strengthening export growth in June but concern remained about how shipments to China might be affected by its slowing economy.

The MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.2 per cent but still holding well above a near 1-1/2 year low hit on July 8.

Tokyo's Nikkei rose 0.4 per cent, helped by a weaker yen, while Australian shares were off 0.2 per cent.

Capital flow trends suggest money managers are slowly turning more bullish towards the region's growth prospects within the broader emerging market bloc. "Asia remains one of the bright spots in the global economy with China and India remaining committed to the broader economic reforms agenda," said Kenneth Akintewe, a portfolio manager at Aberdeen Asset Management, which globally has US$490.8 billion in assets under management.

Equity and bond inflows turned positive for the week of July 15 in Asia while Latin America posted yet another week of redemptions from both these asset classes, according to EPFR data compiled by BNP Paribas.

Those green shoots were evident in the region's currency and fixed income markets where the Chinese yuan has been rock solid amid the global currency market volatility while a broad index of local currency bonds in Asia compiled by JP Morgan has gained a chunky 5 per cent over the last year.

Equities remained on the backfoot thanks to disappointing earnings from global tech giants, led by Apple whose shares plunged overnight, a day after the iPhone maker's revenue forecast for the fourth quarter was below market expectations.

Microsoft also slumped after reporting its biggest quarterly loss.

In currencies, the dollar nudged up 0.1 per cent to 124 yen after rebounding overnight from a low of 123.27 thanks to a rise in US home sales to a 8-1/2 year peak. The euro was little changed at US$1.09490 after coming off an overnight peak of US$1.0966.

Weaker commodity prices also supported a mild rebound in the dollar. Brent crude prices lost 1.6 per cent on Wednesday after data showed US crude inventories rose last week, while spot gold slid to a five-year low on the dollar's bounce. "Sentiment towards commodities as a whole has been plummeting as the Fed lift-off timeline narrows and the drive to the dollar returns after six weeks of macro turmoil," Evan Lucas, market strategist at IG in Melbourne, wrote.

The Greek debt crisis has gone on the back burner for the time being after Athens reached an agreement with its European creditors earlier this month, allowing market focus to shift back towards divergences in monetary policies between countries.

The drop in commodity prices has not been kind to commodity currencies such as the Canadian dollar, which retreated overnight to a six-year low of C$1.3053 against the US dollar.

The Canadian dollar and other commodity currencies could weaken even more if the US Federal Reserve begins hiking interest rates as early as September.

The New Zealand dollar, which also probed multi-year lows recently against the US currency, fared a little better after the Reserve Bank of New Zealand delivered a smaller interest rate cut than some in the market expected and softened its rhetoric on the kiwi following its recent, dramatic fall.

The kiwi went as high as US$0.6654 to put some distance between a six-year trough of US$0.6498 hit last week.

REUTERS