Asian shares ease on China slowdown worry

Reuters: Asian shares slipped on Wednesday as fresh concerns about China’s economic slowdown dampened investors’ risk appetite, which have been generally rising on a brightening outlook for the U.S. economy.

 Following weak closings in U.S. and European equities markets, the MSCI Asia Pacific ex-Japan index slipped 0.3 percent, with miners leading the 0.7 percent decline in the resource-reliant Australian stock market.

Japan’s Nikkei average was down 0.3 percent.

Commodity-linked currencies such as the Australian dollar steadied after taking a hit on Tuesday, when global miner BHP Billiton (BHP.AX) (BLT.L) said it saw signs of flattening growth in iron ore demand in China, Australia’s single biggest export market.

Also, a rise in Chinese retail energy prices stoked fears they would undermine growth.

“Concerns about global growth, specifically China, have weighed on market risk appetite,” Barclays Capital analysts said.

“A bigger contrast in growth prospects in the U.S. versus other major economies should see currencies that are more liked to the U.S. outperform,” they said.

The dollar was also steady against a basket of major currencies and remained near an 11-month high of 84.187 against the yen hit last week. The euro hovered near a 1-week high around $1.3266 reached earlier this week.

A steady dollar weighed on commodities, with spot gold down 0.1 percent at $1,649 an ounce.

Asian credit markets were slightly weaker early on Wednesday, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by about 3 basis points.

OIL EYED

Oil dropped nearly 2 percent on Tuesday as Saudi Arabia sought to stem a price rise which has threatened the global economy. Oil Minister Ali al-Naimi said the kingdom was pumping 9.9 million barrels per day (bpd) and willing to boost supplies to the maximum 12.5 million bpd immediately if needed.

Brent crude settled on Tuesday at $124.12 a barrel, down $1.59 on the day and off earlier lows of $123.20. U.S. crude was up 0.3 percent to $106.40 a barrel on Wednesday, after settling down $2.48 on Tuesday.

Market sentiment has recently been consistently underpinned by encouraging signs of economic recovery in the United States, the world’s largest economy.

U.S. data on Tuesday showed housing starts fell in February, but permits for future construction jumped to their highest level since October 2008, reflecting steady improvement in the housing market.

But Federal Reserve Chairman Ben Bernanke on Tuesday hinted at no complacency, saying the U.S. central bank would be ready to act if conditions worsened again even if Europe’s financial troubles have eased.

Treasury Secretary Timothy Geithner, who is testify alongside Bernanke on Wednesday, has also warned against an approach that focuses too heavily on short-term budget cuts.

While Greece this week received its first batch of bailout funds to ride out the huge debt repayments falling due this month, Italy is struggling to win support for reforms crucial to turning around the euro zone’s third-largest economy and paying down massive debts.

Italian Prime Minister Mario Monti set a collision course with the country’s biggest trade union on Tuesday after talks on a historic reform to an employment protection law failed to produce a deal.

“With little data on the docket this week from the United States, market participants have been looking for cues from Asia and Europe, and thus far they haven’t been sanguine,” said Christopher Vecchio, currency analyst at DailyFX.