Asian Stocks On A Slippery Road, Euro Stuck Near Lows

February 2nd, 2014 by James

On Monday, Asian shares were giving ground at a slow pace as strains in emerging markets demonstrated little signs of abating while adding pressure for another policy easing in Europe shoved the euro to lows of 10 weeks.

Asian Stocks On A Slippery Road, Euro Stuck Near Lows

Japan’s Nikkei .N225 led the way with a loss of 1.2 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.2 percent, while Seoul’s KOSPI lost 0.6 percent .KS11.

This week, investors can expect a lot of event risk with a raft of global business surveys and jobs data from the United States to provide a clearer view on how well the global economy is performing.

It was cautioned by analysts that the ongoing Lunar New Year holiday that began on January 31 probably dragged on output as manufacturers shut up shop for the biggest annual holiday of China. This was after another downbeat report from China where the official Purchasing Managers’ Index (PMI) dipped to 50.5 in January from December’s 51, in line with market expectations.

The PMI of South Korea, on the other hand, edged up to its highest in eight months. “Manufacturing conditions continue to improve in Korea, boosted by stronger new orders on the external front,” said HSBC economist Ronald Man. “This suggests that Korea is on track for a gradual export-led recovery.”

Inflation in the euro zone ran at just 0.7 percent for the year to January, a level that has prompted the European Central Bank to ease in the past.

“We think the low inflation readings in the euro area, along with fears of a further decline into deflationary territory, will lead the ECB to cut the main refinancing rate by 15 basis points, and to cut the deposit rate by 10 basis points,” said Dean Maki, an economist at Barclays.

“Advanced economy growth is benefiting from the very accommodative monetary policy that has been fostered by low inflation readings.”

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