Hong Kong: Asian stocks slipped on Friday, led by Japan, on signs of sluggish consumer electronics demand, while the bruised dollar steadied, with dealers focused on how upcoming economic data would impact views on a Federal Reserve meeting next week.
Many asset markets have hardly moved this week, but the modest price action belies the tense jostling for positioning ahead of a storm of events and economic data next week that could cause volatility to spike and determine investors’ tolerance of risk, including potential new bond purchases by the Fed.
US gross domestic data for the third quarter is due later in the day, though it will probably be viewed as an indicator of just how much QE2, a new Fed money-printing program, will be -- a question that has consumed traders and investors for the past two months.
GDP growth is expected to come in at 2% on an annualised basis, a Reuters poll showed.
“While such acceleration of growth would make Q2 seem less urgent on the surface, core PCE price data will be more important, and if it shows a slowdown, the market will likely increase expectations of the amount of Treasuries the Fed will buy,” Dariusz Kowalczyk, senior strategist with Credit Agricole CIB in Hong Kong, said in a note.
Until the outcome of the Fed meeting, investors were finding fewer reasons to hold on to equities.
Japan’s Nikkei share average fell 1.8% to a 1-month low as the yen strengthened broadly and equity futures were sold aggressively.
Electronics makers were under fire after Sharp Corp, whose shares were down 5.6% cut its full-year earnings forecast on reduced demand for flat-screen televisions.
A drop in demand for consumer electronics also stung Samsung Electronics Co, which saw its stock fall 1.8 percent after the world’s top producer of TVs and flat screens said a supply glut will weigh on memory chip prices and LCD prices will keep falling in coming months.
The MSCI index of Asia Pacific stocks outside Japan slipped 0.3%, though remained in a narrow range carved out this month.
A common reason cited by electronics exporters for their grim outlooks is domestic currency appreciation, a subject that will dominate a Group of 20 leaders meeting next month.
The dollar fell 0.4% against the yen, the result mostly of spillover from Japanese currency strength against other currencies. The euro slipped 0.2% to $1.3901 after a 1.2% jump overnight. The euro had trouble breaking above a technical obstacle around $1.3950, leading some traders to take profits.
The dollar index, a measure of the its performance against a basket of six other major currencies, was up 0.2% on the day and basically flat on the week.
The index is down 6.3% since September, when expectations grew the Fed would embark on a path to quantitative easing, basically printing money to buy assets and flood the financial system with cash.
Commodities prices, which have been moving tightly in the opposite direction of the dollar for the past few months, were generally under pressure as the dollar held its ground on a broad basis.
Gold was down 0.2% to $1,340.50 on ounce, having now slid 2% since hitting a record high two weeks ago.
Oil futures were down 0.3% to $81.91 a barrel, still up $10 since September.
“We still think the US dollar is going to come under severe pressure, so we’ll see strengthening commodities prices and that should help our miners,” said Patersons Securities dealer Martin Angel in Australia.