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Asia stocks dip with no signs to end of slowdown

(Agencies)
Updated: 2009-01-12 15:58

HONG KONG – Asian stocks slipped for a fourth consecutive session and the yen climbed against the euro on Monday, as a relentless global economic slowdown renewed invester caution about taking on risk.

A man reads information on an electronic screen in front of a board displaying the Shanghai Composite Index at a brokerage house in Shanghai January 5, 2009. [Agencies]

Friday's December US payrolls report, which showed more than half a million jobs lost and the highest unemployment rate since 1993, aggravated anxieties that consumer demand for Asian exports is nowhere near recovering, keeping oil prices near $40 a barrel.

"The negativity still sits in the market, nothing's really changed in 2009," said Dominic Vaughan, senior dealer at CMC Markets in Australia. "In the next three to six months we've still got difficult times ahead for commodity markets and global markets as well," he said.

The MSCI index of stocks in the Asia-Pacific region outside Japan fell 1.1 percent, down for a fourth day after a rally that lifted the gauge to a one-month high fizzled last week.

Japan's markets were closed for a public holiday.

Australia's benchmark S&P/ASX 200 index led the region lower, falling 1.6 percent. A steady drumbeat of dour global economic data has darkened the outlook on demand for industrial materials, weighing on shares of global miners such as BHP Billiton Ltd.

The euro was under broad pressure ahead of a European Central Bank policy meeting on Thursday, at which policymakers were expected to cut rates by a half-percentage point to 2 percent.

A collapse in the European manufacturing sector as well as the increased risk of sovereign debt rating downgrades in Europe put pressure on the ECB to cut rates and catch up with other major central banks. The Bank of England has cut borrowing costs to a record low and the Federal Reserve has set rates within a negligible range of zero to 0.25 percent.

The euro fell 0.4 percent against the US dollar to $1.3422. Against the yen, the euro was down 0.4 percent to 121.01 after an aggressive selloff on Friday.

The US dollar was trading largely unchanged at 90.15 yen, as the need for safety increased demand for both currencies.

Aluminum producer Alcoa will report its results later on Monday, kicking off the earnings season. Investors will be wary of any reason for analysts to cut their US earnings expectations, which could kill off the past month's rally into stocks, commodities and emerging markets.

Last week, capital slowly flowed back into riskier assets, though investor caution after such a devastating 2008 also kept money market funds absorbing fresh investment.

Corporate bonds have seen heavy demand in the last week as hunger for yield and bargain hunting drove portfolio managers out from the sidelines. High yield bond funds took in $910.9 million in new investment last week, the highest weekly inflow since Boston-based research firm EPFR Global began to track the data in four years ago.

"The winning run by High Yield Bond Funds has been driven by a combination of gradually rising risk appetite, a hunger for yield, short covering and the quality of some debt that has dropped into the high yield/junk pool in recent months," said Brad Durham, EPFR Global managing director in a note.

The yield on the benchmark 10-year US Treasury note was up a touch to 2.41 percent from 2.39 percent late on Friday in New York, when the US payrolls report caused a rush to safety.

The jobs data also hit a nerve in commodity markets.

US light crude for February delivery edged down 32 cents to $40.51 a barrel, flirting with a sustained drop below the psychologically important $40 level.

News that OPEC kingpin Saudi Arabia plans to cut oil output to below its agreed target for the cartel, ongoing supply disruptions in Europe from the Russia-Ukraine gas dispute and tensions in the Middle East did little to sway the market from a focus on dwindling world-wide energy demand.