Hong Kong: Asian shares fell on Monday and the euro dipped as festering debt problems in the euro zone prompted investors to shift out of riskier assets, dousing optimism over a fall in the US jobless rate last week.
Japan’s Nikkei average sank to a two-month closing low as exporters like Sony Corp were clobbered by a strong yen, which has climbed to multi-month peaks as investors look for safe havens where they can ride out the recent market turmoil.
Markets are worried that problems in Greece, Portugal and other weaker euro zone states could upset or derail the still fragile global economic recovery and they sold growth-linked currencies like the New Zealand dollar and the Australian dollar.
European shares were seen mixed at the open. Futures for DJ Euro Stoxx slipped 0.1%, while futures for Germany’s DAX were flat and France’s CAC 40 were up 0.5% US stock futures were marginally higher.
The euro fell 0.4% to $1.3619, edging back towards an 8-month low hit on Friday. The single currency has lost around 10% from a 15-month high of $1.5145 in late November.
At a weekend meeting, European ministers tried to assure their counterparts in the Group of Seven that the euro zone’s debt crisis is under control and they would make sure Greece sticks to its budget-cutting plan. [ID:nN06216480]
But analysts said Europe needs to go beyond words to restore confidence among investors that it will prevent a sovereign default.
In Asia, losses in the energy and industrial sector dragged stocks to 5-month lows on fears that headwinds facing the global economy would dampen demand for oil and other commodities and cut corporate profits.
“It is adding to the concerns investors have overall in taking more risk into their portfolios,” said Mark Konyn, who oversees about $11 billion as Asia-Pacific chief executive of RCM, a unit of Allianz Global Investors.
“The lack of clarity is adding to the volatility,” he said.
Japan’s Nikkei average fell 1% to close below the 10,000 mark, ending just above the crucial 200-day moving average as anxiety over Europe had investors cutting exposure.
But Kenichi Hirano, operating officer at Tachibana Securities said stocks were starting to look cheap as the Nikkei’s 14-day RSI (relative strength index) was at 36 -- its lowest since late November.
Anything from 30 or lower is considered oversold territory.
The yen, which is widely used as a funding currency for investing in riskier higher-yielding assets, rose as these risk-trades were unwound amid the euro zone’s troubles.
It has gained 4% against the dollar so far this year and is hovering near a 10-month peak against sterling and its highest in nearly seven months against the Australian dollar.
Asia Pacific shares outside Japan as measured by MSCI fell 0.6% to its lowest levels since early-September. The index is down over 10% year to date and hovering just above the crucial 200-day moving average.
The Thomson Reuters index of Asia ex-Japan equities fell 0.76%.
Growing euro zone problems also soured the appetite for currencies like the New Zealand dollar and the Australian dollar, which are dependant on global economic growth.
The kiwi fell to a low of $0.6857, just off $0.6807 struck in Friday’s offshore trade, its lowest since Sept. 4. The Aussie hovered around $0.8660 for much of the session, above a four-month low of $0.8576 hit on Friday.
Last week, the cost of insuring debt from the three eurozone countries - Greece, Portugal and Spain - jumped as Greece’s debt woes was put on the agenda of the meeting of G7 rich nations’ finance ministers and central bankers in Canada.
But analysts say a fears of default are unfounded.
“Our baseline scenario is that a sovereign default by an EU member country would be averted by EU action. We think there’s limited juice left in the eurozone break-up trade (so) we advise those not yet in to stay out,” said ING in a client note.