Asian Shares Turn Lower As China Growth Concerns Resurface

Nerves got the better of Asian share markets on Tuesday as they turned lower after an upbeat U.S. retail sales report was eclipsed by soft data from China, providing a stark reminder to investors of the headwinds facing the world’s second-largest economy. 

The MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3 percent, handing back earlier modest gains made after the U.S. data had helped Wall Street bounce from a sharp selloff in recent days.

Financial spreadbetters see cautious start to trading in Europe, tipping Britain’s FTSE 100 to open flat, and Germany’s DAX and France’s CAC 40 to eke out slim gains. 

Data released on Tuesday showed China’s money supply grew at the weakest pace in more than a decade in March in another sign of softening economic momentum. Global markets have been buffeted in recent months by a spate of weak Chinese data, raising concerns of a deepening economic slowdown.

The Shanghai Composite Index lost 0.9 percent, and trading in much of the rest of Asia lacked conviction to lift riskier assets.

The tense geopolitical backdrop in Ukraine kept investors on edge, which also undermined risk appetite. 

Ukraine’s president threatened military action after pro-Russian separatists occupying government buildings in the east ignored an ultimatum to leave and another group of rebels attacked a police headquarters in the region. The flare-up came less than a month after Russia completed its annexation of Ukraine’s southern Crimea peninsula.

Japan’s Nikkei bucked the trend and rose 0.8 percent after skidding to a six-month low on Monday. 

On Monday, encouraging retail sales from the world’s biggest economy, which had been bogged down by a harsh winter, gave some respite for the Standard & Poor’s and Nasdaq indexes, which had just suffered their worst week since June 2012.

In the currency markets, the dollar held steady after the solid U.S. retail sales data. The euro remained under pressure on weekend comments from European Central Bank officials, including ECB President Mario Draghi, who rekindled speculation about more easing in the euro zone. 

The dollar stood at 101.91 yen, little changed from late New York trade on Monday, when it pulled away from a three-week trough of 101.32 hit late last week.

The euro was also steady at $1.3815, having been knocked off a three-week peak of $1.3906 hit last week on the back of the dovish comments from ECB officials. 

“Jawboning by policymakers and the risk of more stimulus should be enough to put a top in the EUR/USD but unfortunately there are other factors at play that are out of the ECB’s control,” Kathy Lien, managing director of FX strategy at BK Asset Management, wrote in a note to clients.

“With the European Sovereign Debt crisis in the distant memory, capital inflows are returning to Europe, creating demand for euros. At the same time, there is very little upside momentum in U.S. yields even after today’s strong retail sales report,” Lien said. 

U.S. Treasuries yields rose on Monday as stocks gained on the better-than-expected retail sales data, but the 10-year U.S. Treasury note was still at 2.644 percent, not far from a six-week low of 2.603 percent hit on Monday.

Nickel dipped after 11 straight sessions of gains but still traded within reach of a 14-month high of $17,917 a tonne scaled on Monday in the wake of Indonesia’s ongoing ore export ban, now in its third month, and prospects of tougher sanctions on Russia, a leading producer of the metal. 

Three-month nickel on the London Metal Exchange was at $17,661 a tonne.

“The Indonesia story has not changed … there is no sign yet that there might be any reversal of the policy,” Natixis analyst Nic Brown said. 

“And I think when you hear the Americans starting to talk about potential sanctions on Russia, people instinctively look at palladium and nickel: two metals that could be affected either by sanctions or by Russian retaliation.”

Gold fell back from its three-week high of $1,330.90 touched on Monday when renewed concerns over hostilities in the Ukraine increased the precious metal’s safe-haven appeal. 

Spot gold traded at $1,321.75 an ounce with the strong U.S. data offsetting some of the safe-haven bids.

Brent crude futures dropped below $109 a barrel following a surge to a six-week high in the previous session, as investors looked ahead to a meeting in Geneva that they hoped would bring a political resolution to the escalating crisis in Ukraine. 

U.S. wheat futures clung much of its gains after surging nearly 3 percent on Monday on tensions in the breadbasket Black Sea region coupled with a threat of freeze damage to crops in the U.S. Plains.

Chicago Board of Trade wheat for May delivery edged down 0.2 percent to $6.77-3/4 per bushel.

Source : Reuters