Hong Kong: Japanese shares fell more than 2% on Thursday and other Asian markets were on the defensive as confidence in a rally this week proved fleeting in light of a shaky global economy and financial system.
European shares were also set to slide, reversing a two-day winning streak. The yen rose against the dollar amid signs of fund repatriation ahead of the end of Japan’s fiscal year this month, and perceptions that recent safe-haven inspired gains for the US currency had gone far enough.
Oil prices bounced from two days of sharp losses though the focus remained on a meeting of Opec this week and uncertainty about whether the oil producers will cut production or not.
Thursday’s stock trading reflected a trend this year of steep declines followed by bursts of small gains that quickly fizzle as investors focus on the bleak global economy and uncertainty about how to cleanse the banking system of toxic debt.
“Investors are quite sceptical now,” said Albert Hung, chief investment officer at Alleron Investment Management in Australia.
Japan’s Nikkei average fell 2.4% after surging nearly 5% on Wednesday.
The MSCI index of shares elsewhere in Asia-Pacific were down 0.7% as of 12:40pm, cutting into 5% of gains over the previous two sessions.
New signs of global economic weakness continued to sap confidence. Revised data on Thursday confirmed Japan’s economy posted its sharpest contraction since the oil crisis of 1974 in the final three months of last year.
Forecasts are proving equally dire. World Bank President Robert Zoellick told the Daily Mail newspaper the global economy is on track for its worst recession since the 1930s, with output likely to shrink by 1-2% this year.
Scepticism about policy makers’ ability to resolve the global woes, and how the United States will cleanse its banking system, pervades the run-up to the Group of 20 finance ministers’ meeting this weekend.
The United States and Britain on Wednesday called on leading economies to ramp up spending to break the global recession and to complement efforts to revamp regulations to prevent future financial crises.
That call has already been met coolly by many European nations, raising doubts about whether the G20 finance gathering in England will make much headway.
Major Asian stocks indexes, including in Australia, China, Taiwan and Singapore fell.
Seoul shares ended flat, but Bombay shares rose 2.3% as investors played catch-up with gains worldwide following a two-day market holiday.
Among the big regional movers, National Australia Bank shares rose 2.6% despite saying it would cut its first-half dividend by a quarter, as investors felt relieved that its overall business remained strong.
Reuters polls show the “Great Recession”, as the IMF has termed the global downturn, will clamp leading economies in a vicious grip well into 2010 and push unemployment to multi-year record.
Sporadic signs of hope do appear, however, with data on Thursday showing a surge in Chinese bank lending in February helping offset a report that the country’s industrial growth had grounded down to a record low.
The yen gained, sending the dollar to as low as ¥95.95 on trading platform EBS, its weakest in two weeks. After trimming some losses, the greenback was down 0.9% at ¥96.29.
Oil futures rebounded 60 cents to $42.93 a barrel, cutting back on a 10% drop over the previous two sessions that had been sparked by bearish data from the United States and China, the world’s two largest oil consumers.
Gold regained some of its safe-haven appeal, rising about $8 to $913.70 an ounce, following recent drops sparked by concerns over weak demand.