Asian markets up ahead of key European summit
HONG KONG—Asian shares were broadly higher Wednesday, with most reversing earlier losses as markets await a key eurozone debt crisis summit while hopes were raised that China could loosen its economic policy.
Sydney added 0.35 percent, or 14.6 points, to end at 4,242.5 and Seoul ended 0.30 percent higher, or 5.66 points, at 1,894.31 and Hong Kong added 0.52 percent, or 98.34 points, to 19,066.54 while Shanghai jumped 0.74 percent, or 17.81 points, to 2,427.48.
But Tokyo closed down 0.16 percent, or 13.84 points, at 8,748.47.
The uncertainty in the European Union has weighed on global commodity and equity markets for months, with Italy now joining Greece in the emergency room.
The cancellation of an EU finance ministers’ meeting before Wednesday’s summit hiked concerns that the high-level talks will fail to produce a deal to end a crisis that has threatened to plunge the world economy into recession.
“The cacophony of voices, shifting timelines and complexity of the problem lead us to remain cautious on the euro and risky assets until more about the next steps is known,” Barclays Capital said in a note.
RBS Morgans principal investment adviser Christopher Macdonald cautioned: “I don’t think people should be buying equities before the EU meeting.”
The eurozone wants to beef up its 440-billion-euro ($610 billion) rescue fund, the European Financial Stability Facility, to persuade markets it has the means to protect highly indebted nations such as Greece and Italy.
Leaders also want to agree on a huge write-down on bondholders’ debt of stricken Greece and make sure banks have enough reserves to withstand losses.
The 27-nation EU will meet first at 1600 GMT Wednesday to decide on the bank recapitalization followed by a summit of the 17 eurozone leaders to, in theory, finalize their grand bargain.
However, traders, despite the nerves ahead of the eurozone summit markets, were lifted after Chinese Premier Wen Jiabao said Tuesday the government might “fine-tune” economic policy, raising hopes of a relaxation of tight credit.
Worried by surging inflation, China has ushered in several policies over the past year to tighten credit, including restricting the amount of money banks can lend and hiking interest rates five times since October 2010.
Visiting the northern port city of Tianjin on Tuesday, Wen repeated that controlling prices was a key task but he also said the government could adjust economic policy when the time was right.
“We must control the strength, rhythm and emphasis of macroeconomic policy, pre-emptively adjusting and fine-tuning at an appropriate time to an appropriate degree,” the official Xinhua news agency quoted Wen as saying.
He added the government would maintain “appropriate” increases in money and credit, but gave no details.
“This is a game-changer to Wen’s thinking as far as macro policy is concerned,” Credit Suisse said in a research report.
“We take Wen’s remarks as a hint for selective and measured easing.”
KGI Asia Chief Operating Officer Ben Kwong said the Asian market was “connected to Wen Jiabao’s remarks.”
Sydney got a boost after government data showed inflation had eased to 0.6 percent in the third quarter, down from 0.9 percent in the previous three months and paving the way for a possible interest rate cut.
The Aussie dollar slipped on the news, dropping from 104.32 US cents to 103.42 US cents in European trade.
US stocks slumped Tuesday on indications of a still-weak economy and worries over Europe’s debt problems, with the Dow Jones Industrial Average losing 1.74 percent by the close.
The tech-heavy Nasdaq Composite shed 2.26 percent while the broader S&P 500 lost 2 percent, snapping a three-session winning streak.
Data released Tuesday showed US consumer confidence fell to its lowest level since March 2009, with third-quarter GDP data due Thursday.
“Consumer confidence is now back to levels last seen during the 2008-2009 recession, said Lynn Franco of the Conference Board.
The euro bought $1.3922 in European early trade, marginally up from $1.3904 late Tuesday in New York, while it was down at 105.68 yen from 105.78 yen.
The dollar gained to 75.90 yen after falling to a new post-World War II low of 75.73 yen briefly in New York on Tuesday. That prompted further efforts by officials in Tokyo to talk the Japanese unit lower with intervention threats.
“I think we share this sense of crisis and I hope (the Bank of Japan) will act properly,” Finance Minister Jun Azumi told reporters.
His remark came after the Nikkei business daily reported the Japanese central bank would discuss additional monetary easing measures to help blunt the yen’s impact on the economy when its policy board convenes Thursday.
New York’s main contract, light sweet crude for delivery in December, was up 11 cents to $93.28 per barrel.
Brent North Sea crude for December delivery fell 35 cents to $110.57.
By 1040 GMT, gold was up at $1,713.50 an ounce, against $1,662.00 late Tuesday.
In other markets:
— Taipei closed 0.60 percent, or 44.61 points, higher at 7,535.82.
Hon Hai rose 2.03 percent to Tw$80.4 while HTC was 1.03 percent higher at Tw$687.0.
— Manila ended 0.42 percent, or 17.76 points, lower at 4,224.76.
Ayala Land fell 0.50 percent to 15.86 pesos and DMCI Holdings fell 1.92 percent to 38.25 pesos, while Philippine Long Distance Telephone rose 1.04 percent to 2,330 pesos.
— Wellington ended flat, edging up 0.61 points at 3,296.98.
Telecom fell 1.2 percent to NZ$2.53 and NZ Oil & Gas gained 4.8 percent to NZ$0.65.
— Jakarta closed 0.76 percent, or 28.13 points, higher at 3,738.61.
Gas distributor Gas Negara gained 5.5 percent to 2,900 rupiah, Bank Rakyat jumped 2.3 percent to 6,650 rupiah and cigarette maker Garam increased 2.6 percent to 58,250 rupiah.
— Bangkok closed 0.41 percent, or 3.87 points, lower at 938.68.
— Singapore, Kuala Lumpur and Mumbai were closed for public holidays.
