Hong Kong: Asian stocks fell on Tuesday as investors took profits on a recent run-up in technology shares and awaited earnings reports from major US companies, while casting a wary eye on regional central banks taking more steps to tighten policy.
European shares followed Asia lower, dipping 0.2% in early trade. But US stock futures were modestly higher after a US holiday on Monday.
The US dollar eased, giving a boost to oil and commodity prices, which helped underpin shares of resource companies despite the broader equity market sell-off.
“Part of the earnings have been exaggerated by record low interest rates and you can’t expect that to carry on for the next 12 months,” said Sean Darby, chief Asia strategist at Nomura International in Hong Kong.
“Input costs will start to rise now after companies have been living off cheap inventories for the last six months. That will also start feeding into their earnings.”
The MSCI index of Asia Pacific stocks outside Japan slipped 0.3%, with technology shares the biggest drag after a sharp run-up in the sector that began early last year. The Thomson Reuters index of regional shares pulled back 0.6%.
Chi Mei Optoelectronics, Taiwan’s No. 2 LCD maker, tumbled 4.1%, while South Korea’s Samsung Elecronics fell 2.4%. In Hong Kong, shares of Foxconn International Holdings slumped 6%.
Japan’s benchmark Nikkei average dipped 0.8% as the stronger yen weighed on shares of exporters and as traders took profits from its recent rally, which saw the benchmark hit a 15-month high last week. Honda Motor Co was 2.1% lower and Toyota Motor Corp slipped 1.2%.
An expected bankruptcy filing by Japan Airlines had little market impact, with its shares already having plunged to just ¥5.
Taiwan’s tech-heavy market was the worst performer in the region after reaching a 19-month intraday peak on Monday. The main TAIEX share index fell 1.1% as investors trimmed holdings of tech shares heading into earnings season.
Taiwan’s central bank on Tuesday followed China’s lead to rein in excess liquidity by raising the rate at which banks borrow from each other to an eight-month high, suggesting authorities may be leaning towards monetary policy tightening to curb inflationary pressures.
The move came just after China’s central bank lifted the yield in an auction of one-year bills more than expected, raising worries that authorities may be considering more aggressive measures to cool lending growth and keep the economy from overheating.
The fresh step by the People’s Bank of China capped gains in Shanghai and Hong Kong, largell offsetting expectations for strong Chinese economic data due for release this week.
Investors were cautious, however, as US financial markets reopen after Monday’s holiday. A slew of key earnings reports are due this week from heavyweight stocks, including Bank of America , Citigroup, IBM General Electric and Google.
Stronger-than-expected results last week from tech bellwether Intel Corp failed to excite investors, while steep loan losses reported by JPMorgan Chase & Co. rattled investors on worries that US consumers are still struggling under the weight of heavy debts.
The dollar fell 0.2% to 90.55 and hit a four-week low, while the euro fell to a four-month low against the pound as Greece’s fiscal woes continued to take a toll on the common currency.
At a meeting of euro zone finance ministers on Monday, Greece received the group’s backing to tackle its debt troubles, even as they pressed the country to do more on its own.
Greece’s ballooning budget deficit and debt of more than 120% of GDP has triggered downgrades by debt rating agencies and hurt the euro in the past few months.
The pound also got a boost from reports that US based Kraft Foods and Britain’s Cadbury Plc were arranging a $19 billion deal to create the world’s largest confectionary group.
But the Australian dollar lost ground after the Chinese central bank move as traders feared gradual policy tightening by Beijing will curb demand for commodities from iron ore to oil.
Metal and oil prices rose on the weaker dollar.
Palladium hit a fresh 18-month peak, spurred by the launch of an exchange-traded fund backed by the metal earlier this month, while gold inched up $6.10 to $1,138.65.
Oil extended gains scored on Monday, edging up 13 cents a barrel to $78.13.
In the bond market, five-year Japanese government bond yields fell a basis point to 0.505% after a solid auction of the maturity, bucking the rise in most other yields.