Hong Kong: Asian stocks fell on Thursday as weak US retail sales underscored the long road to economic recovery, prompting investors to take profits on winning bets in equities, higher-yielding currencies and commodities over the past two months.
The retreat in Asian shares tracked an overnight drop on Wall Street after retail sales unexpectedly fell in April, suggesting that consumers were still struggling from job losses, falling home prices and tighter credit.
Futures on Britain’s FTSE 100 were up 0.5% in early trade, while futures on Germany’s DAX wer little changed.
“US retail sales point to a continued slump in the world’s largest economy,” said Y S Rhoo, a market analyst at Hyundai Securities in Seoul.
The dollar edged up from a four-month low hit the previous day as investors had gradually shifted funds away from the safe-haven US currency and into riskier assets. Oil prices pulled further away from a six-month peak reached this week.
Analysts said markets were likely seizing on the poor US data to take profits on positions that were made on hopes that global growth was slowly picking up. That optimism drove up Asian shares more than 50% at one point from their low mark in early March.
Ratings agency Standard & Poor’s said in a report on Asian economies on Thursday that it was too early to say the global economy has bottomed.
The MSCI index of Asia-Pacific shares outside Japan dropped 3.3% and looked poised for its biggest one-day drop in six weeks. But the benchmark was still up some 19 % since the start of the year and 45% from its year low struck in March.
On Wednesday, the S&P 500 shed 2.7%, and futures on that US stock index were down slightly in Asia.
Japan’s Nikkei average fell 2.6%. Hong Kong’s Hang Seng index shed 3.2%, with HSBC and China Mobile - the two biggest heavyweights in the index - leading the decline.
In another sign that investors were taking profits, open interest in Hang Seng futures fell on Wednesday after reaching its highest level since 8 October - at the tail end of last year’s slide to five-year lows.
The dip in open interest and fall-off in volume signalled that market players were taking chips off the table and were reluctant to chase the market higher.
Investors are also keeping an eye on the results of India’s general election. The ruling Congress-led coalition is slightly ahead of the opposition Hindu nationalists-led alliance, but both groups have fallen short of a parliamentary majority, according to early projections.
The decline in Mumbai’s SENSEX was limited compared with the rest of the region, shedding 1%.
Dollar limps up
The dollar limped up from a four-month low hit on Wednesday, partly on the revival of risk-taking but also because its break through the 200-day moving average against the euro sparked wide selling.
Chart technicals for the US currency have turned negative since the break of the widely tracked 200-day moving average, which has signalled turning points against the euro in the past.
The euro slipped 0.2%to $1.3570 after having jumped to $1.3722 the previous day, threatening to push above the peak reached in March that would likely add fuel to the rise.
The dollar’s slide had reinforced a jump in gold and oil prices. Gold was down 75 cents an ounce at $924.70 while US crude dipped 44 cents to $57.58 a barrel after having climbed as high as $60.08 this week.