Hong Kong: Asian shares edged higher on Thursday as recent selling pressure eased and the safe-haven bid for the dollar and gold retreated, but reminders of the global economic gloom and financial sector woes kept investors cautious.
Weak US housing and industrial output data, along with the concerns that worsening economies in central and eastern Europe could put more pressure on European banks, is raising the prospects of more weakness in global markets.
Japanese government bonds dipped ahead of a policy decision by the central bank, which is expected to keep rates unchanged but focus on further steps to help corporate financing.
Some analysts predict the yen’s days as a safe-haven may be limited because of the mounting evidence of a deepening contraction in Japan, the world’s second-largest economy.
“There is an emerging view that the yen may not be so appropriate to buy, unlike before, at times of risk aversion,” said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.
The MSCI index of Asia-Pacific stocks outside Japan gained 0.3%as of 8am, but it was still down about 6% for the week.
Data on Wednesday showed US housing starts and building permits dropped to record lows in January, with US industrial output shrinking more than expected last month.
These reports come as European banks such as ING posted losses and as central and eastern European currencies suffer because of risk aversion on concerns about the region’s declining growth and heavy overseas debt.
Despite actions by policy makers - including the US pledge on Wednesday of up to $275 billion to help stem a wave of home foreclosures and Germany’s approval of a draft law to allow forced bank nationalisations - investors remained wary about the market outlook.
In Asia, Japan’s Nikkei rose 0.5% after hitting four-month lows on Wednesday and Australia advanced 1.6%. But Singapore fell more than 1%, while South Korea, Hong Kong and Taiwan slipped less than 1%.
The optimism at the beginning of the year that a global economic recovery could be at hand by the second half is dissipating. The US Federal Reserve projected the world’s largest economy would shrink by between 0.5% and 1.3% this year, minutes of its 27-28 January policy meeting showed.
The dollar - which tends to benefit from safe-haven bids - dipped 0.2% from late New York trade to ¥93.65. On Wednesday, it hit its highest level since 7 January on trading platform EBS.
The yen is coming under pressure due to worries about the contracting Japanese economy and political uncertainty as voter support for Prime Minister Taro Aso sinks.
The euro edged up 0.3% to $1.2568, recovering from a three-month low of $1.2513 touched the previous day.
Gold, which rallied to a seven-month high on Wednesday, dropped about $7 to $977.40 an ounce as it consolidated gains.
Oil prices were steady at $34.62 a barrel.