Asia stocks sag while Japan rebounds, euro dips

Wednesday, 19 November 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Asian stocks sagged on Tuesday amid profit taking in Hong Kong and Chinese markets, while Tokyo shares rebounded on expectations that Japan will opt for a snap election that may lead to fresh stimulus measures.

Pedestrians with umbrellas walk past an electronic board showing Japan's Nikkei average (top middle L) and the exchange rates between the Japanese yen and the U.S. dollar (top middle R), outside a brokerage in Tokyo - REUTERS

Spreadbetters saw a slightly higher start for Europe in the wake of Japan’s rebound, forecasting Britain’s FTSE, Germany’s DAX and France’s CAC to open about 0.1% higher. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.3%. Hong Kong and Chinese shares fell for a second straight day after the debut of the landmark Hong Kong-Shanghai trading link as investors continued to lock in profits in stocks that had risen sharply ahead of the launch. Downbeat Chinese home prices data also dampened sentiment. Hong Kong’s Hang Seng shed 0.9% and the Shanghai Composite Index lost 0.7%. Tokyo’s Nikkei .N225, in contrast, rose sharply as the market waited to see if Prime Minister Shinzo Abe will call a snap election, delay a sales tax increase that had been planned for October next year, and consider further economic stimulus. The Nikkei gained 2.2%, erasing much of Monday’s 3% fall suffered when shock data showed Japan had slipped into recession. If he does call an election, Abe will hope his ruling Liberal Democrat Party (LDP) will trounce a weak opposition to reaffirm its mandate to pursue reflationary economic policies. “While there has been some decline in the support rate for Abe’s cabinet there has been no accompanying rise in the support for the opposition from the depressed level. We would therefore expect the main ruling LDP to maintain its majority and for Abenomics to continue,” said Miyuki Kashima, managing director at BNY Mellon Asset Management. “As a result, our positive view on the (Tokyo share) market remains unchanged.” Investors sold the euro on prospects of further easing by the European Central Bank, preferring to hold dollars as the US Federal Reserve is expected to raise rates next year.