Friday, 22 July 2016

Asia stocks slide as weak results halt record Wall St run, yen holds gains

Asian stocks dipped on Friday after weak corporate results halted Wall Street's record run overnight, while the yen held to large gains made after the Bank of Japan governor downplayed the need for "helicopter money" stimulus.

European markets are also likely to open lower, with financial spreadbetter CMC Markets expecting Britain's FTSE 100 .FTSE to open down 0.2 percent, and Germany's DAX .GDAXI and France's CAC 40 .FCHI to start the day 0.4 percent lower.

MSCI's broadest index of Asia-Pacific shares outside Japan asi was down 0.4 percent. It remained close to its nine-month high seen on Thursday, and is headed for a fractional 0.1 percent gain on the week, ahead of the Group of 20 finance officials' meeting in Chengdu, China, this weekend.

China's CSI 300 index .CSI300 and the Shanghai Composite .SSEC both slipped about 0.5 percent. The CSI 300 is poised for a loss of 1.1 percent for the week, and the Shanghai Composite 1 percent.

New Zealand .NZ50 shares continued their record-setting trend, climbing 0.2 percent to hit a fresh all-time high on Thursday. They're headed for a 2.2 percent gain for the week.

Shares in Taiwan .TWII, Indonesia .JKSE and Thailand .SETI all closed at their highest levels in at least a year on Thursday.Australia ended at the highest point since Aug. 6, 2015, and Hong Kong .HSI set a 2016 high. All were trading lower on Friday, but set to end the week higher.

Japan's Nikkei .N225 closed down 1.1 percent, dragged down by the yen's 1 percent rally on Thursday. The index is still up 0.8 percent in a week in which it touched an eight-week high thanks to an initially weaker yen and hopes of fiscal and monetary stimulus.

In a BBC interview, recorded mid-June but broadcast on Thursday, BOJ Governor Haruhiko Kuroda ruled out the idea of using "helicopter money" - directly underwriting the budget deficit - to combat deflation.

"Pretty much everything is on the table when it comes to the next BOJ monetary policy decision on 29 July. Everything, that is, except for outright helicopter money," Frederic Neumann, co-head of Asian economic research at HSBC in Hong Kong, wrote in a note on Friday. "The case for more easing is evident, and markets are expecting swift and determined action."

Japan is likely to miss its deficit-cutting target in 2018 because the government has delayed a sales tax hike by more than two years, public broadcaster NHK said on Friday, citing an unidentified source.

The dollar was down 0.1 percent at 105.68 yen JPY= after coming off its peak of 107.49, its highest in six weeks, the previous day.

The dollar index was also flat at 96.948 .DXY, compared with its four-month peak of 97.323 scaled on Wednesday.

The euro was steady at $1.1020 EUR=. The common currency had briefly risen to $1.1060 on Thursday after European Central Bank President Mario Draghi noted that growth and inflation were moving along the path projected in June.

As widely anticipated, the ECB stood pat on monetary policy on Thursday. But, despite Draghi's statement that more evidence was needed before any decision, the bank kept the door open to more policy stimulus, citing "great" uncertainty and risks to the region's economic outlook.

The Chinese yuan rose against the dollar for a fourth straight day, on track for its biggest weekly gain since April, with traders suspecting state-owned banks of supporting the currency.

The People's Bank of China set the midpoint rate  at 6.6669 per dollar, 0.3 percent firmer than the previous fix of 6.6872. The spot yuan opened at 6.6715 per dollar and strengthened to 6.6692, compared with the previous close of 6.6765.

The Dow Jones Industrial Average .DJI on Thursday snapped a nine-day winning streak, during which it hit consecutive record highs, because of disappointing results from Intel and key transportation companies.

In commodities, crude futures resumed declines after a brief spell higher, extending big falls overnight. Data pointed to record U.S. stockpiles of gasoline and other oil products, when Iraqi crude exports are on the rise, heightening supply glut concerns.

Brent crude  reversed earlier gains to fall 0.3 percent to $46.07 a barrel after tumbling about two percent on Thursday. It is headed for a 3.3 percent drop for the week.

U.S. crude  fell 0.6 percent to $44.49 a barrel, poised for a 3.2 percent fall in a week in which they touched a two-month low.

The pull back in stocks and dollar gave gold a boost. Spot gold XAU= jumped 1.2 percent overnight, but inched down 0.4 percent to $1,325.24 an ounce. Thursday's gains helped shrink losses for the week to 1 percent.

Reference: Shinichi Saoshiro

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