Asia shares edge lower on caution over global growth

TOKYO (Reuters): Asian shares inched down on Friday, tracking New York and European shares lower as weak Chinese trade data raised concerns about the global economy, while the euro eased after another sovereign debt ratings downgrade.

Lingering concerns about Europe’s debt woes and the latest credit rating downgrade of Spain underpinned the safety of government bonds, slightly boosting the price of U.S. Treasuries in Asia on Friday while easing Asian credit markets.

China’s consumer price index rose 6.1 percent in September from a year earlier, coming within expectations and lending support to views the central bank will keep interest rates on hold.

MSCI’s broadest index of Asia Pacific shares outside Japan eased 0.8 percent, but was set for a weekly gain of about 4.7 percent, which would be the largest weekly increase since late March, when the index ended the week up 4.8 percent.

Materials sector led the index lower as concerns grew about weakening demand from the world’s No. 2 economy, China, and the broader global economy, but oil and copper recovered earlier with losses partly on technical rebound.

“Concerns about China’s demand and doubts over Europe’s ability to contain the crisis are somewhat overblown,” said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo.

China’s growth may slow but it will still be high with domestic demand staying solid over the medium-term even if the pace of growth slowed, while Europe has no choice but stand by Greece, he said.

“Investors have undergoing adjustments since the spring, reducing excessive positions, and I feel the markets currently stand at a juncture where players want to confirm the floor and survive the month,” he said.

Most analysts still expect China to grow at least 9 percent this year.

The Nikkei average opened down 0.7 percent after hitting a four-week high on Thursday.

Oil prices recovered after falling on worries about slower demand in the world’s second-largest oil consumer China. Brent crude edged up 0.1 percent to $111.23 a barrel and U.S. November crude ticked up 0.01 percent to $84.24.

The most active December copper contract on the Shanghai Futures Exchange edged up 0.2 percent.

Europe is showing signs of accelerating efforts to shore up the euro zone banking sector and limit the damage from the region’s spreading sovereign debt crisis, but the cost it would have to pay could pose risks to the single currency and growth.

The region’s financial turmoil took a toll on bank earnings, as reduced demand for securities underwriting and acquisition advice eroded earnings of JPMorgan Chase & Co., the second largest U.S. lender the first major bank to post third quarter results.

Downgrades of sovereign ratings continued, with Standard and Poor’s cutting the long-term credit rating of Spain by one notch on Friday.

The euro eased 0.2 percent after S&P downgraded Spain, but it still remained on track for the biggest weekly rally since January.

The European Central Bank said on Thursday that forcing private bondholders to accept losses on euro zone sovereign debt could damage the reputation of the euro, hurt the bloc’s banks and encourage volatility on foreign exchange markets.

The ECB’s warnings made no specific reference to the debate on increasing previously agreed plans for a 21 percent writedown for banks holding Greek debt.

In its October monthly bulletin, the ECB said downside risks relate especially to financial market turmoil.

Sovereign debt woes have put European government bond yields under pressure, with the ECB having to step into the secondary market to buy after an Italian debt auction on Thursday to cap rising yields.

In Asian credit markets, which have reflected the strain of waning confidence in the financial system, spreads on the iTraxx Asia ex-Japan investment grade index widened again by about 8 points early on Friday, after narrowing sharply the day before by about 17 points.

As investors sought relative safety, prices of U.S. Treasury debt added slight gains in Tokyo Friday, with the benchmark 10-year note up 2/32 to yield 2.1745 percent, compared to 2.1798 percent late in New York on Thursday.