Asian stocks stumble, yen pulls ahead on Ukraine anxiety
Saturday, 15 March 2014 00:00
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REUTERS: Asian shares dropped to a one-month low and the yen pushed higher on Friday, as heightened tension in Ukraine ahead of a weekend referendum sent investors scurrying out of riskier assets.
European shares were poised to open lower, putting major regional indexes on course for their worst weekly loss since January. Financial spreadbetters expected Britain’s FTSE 100 to open as much as 0.3% down, Germany’s DAX off 0.8% at the start and France’s CAC 40 to slip as much as 0.6%.
The MICEX index of Russian stocks plunged 2.5% at the open and was down 3.6%. Russia launched new military exercises near its border with Ukraine on Thursday, even as the US cautioned that Moscow risked facing serious steps if annexation was the outcome of a referendum planned for Sunday in the Crimea.
“With the West warning of sanctions on Russia should that happen, and Russia already exploring retaliatory actions to such sanctions, traders fear that the situation could easily spin out of control quicker than they can liquidate their positions,” Jonathan Sudaria, a dealer at London Capital Group, wrote in a note to clients.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4%, touching its lowest level since mid-February and on track for a weekly loss of more than 3%.
Japan’s Nikkei stock average skidded 3.3% to a one-month low, as the yen soared. For the week, the index dropped 6.2%, the biggest weekly drop since last June.
“Investors are unwinding their long positions in the Nikkei and short positions in the yen,” said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas.
The latest developments in the Ukraine crisis sent the perennial safe-haven yen soaring against both the dollar and the euro.
The greenback was down about 0.3% on Friday at 101.58 yen, while the common currency slipped about 0.3% on the day to 140.79 yen.
Taper on track
Solid US retail sales and employment data also reinforced expectations that the US Federal Reserve will stick to its plan of gradually withdrawing its asset-buying stimulus, while Thursday’s disappointing Chinese economic data continued to add to the gloom.
US retail sales rose 0.3% last month, ending two straight months of declines, while separate data from the Labour Department showed initial claims for state unemployment benefits dropped to their lowest level since late November.
On Wall Street on Thursday, benchmark US stock indices fell more than 1.0%, posting their biggest daily losses since early February, with the S&P500 stock index tumbling 1.17%.
The yield on the benchmark 10-year US Treasury note fell to 2.638% in Asian trading from its US close of 2.653%.
Data on Thursday showed China’s industrial output growth fell short of forecasts for the combined January/February period, and retail sales also came in weaker than expected. The disappointing figures fuelled fears of a slowdown in the world’s second biggest economy.
That continued to weigh on the Australian dollar, considered a proxy for China plays. The Aussie lost about 0.2% to $ 0.9009.
The euro also remained under pressure after comments from European Central Bank President Mario Draghi, who said the bank has been preparing additional policy steps to guard against deflation taking hold in the euro zone.
The single currency was down about 0.1% at $ 1.3860, moving away from Thursday’s 2-1/2 year high of $ 1.3967 hit before Draghi spoke.
On the commodities front, copper was nearly flat on the day at $ 6,414 a ton, but was still on track for a weekly loss on expectations of slower demand growth in China.
Gold, a safe-haven favourite, was nearly flat on the day at $ 1,369.06 an ounce after earlier hitting a fresh six-month high, and was poised for its sixth straight weekly rise.
Brent crude held steady above $ 107 a barrel but remained on track for its third weekly loss, while US crude edged down to $ 98.15 a barrel.
