Tokyo/Singapore: Asian stocks were broadly steady On Tuesday after traders took China’s closely-watched inflation data in their stride, while the euro regained some ground after hitting a three-week low the previous day.
London copper futures rallied to a record high after lower than expected consumer price figures from China soothed concerns that Beijing might adopt a more aggressive monetary tightening regime to fight inflation.
Chinese consumer price inflation accelerated to 4.9% in the year to January. It matched the widespread figure that swirled through markets on Monday, but was below the earlier consensus forecast of 5.3%.
Analysts remained wary of a build-up in China’s price pressures, saying Beijing could raise interest rates further, given continued rises in food prices.
“The data probably slightly eased expectations of immediate tightening, although in the overall scheme of things, this doesn’t change the fact that China is still in a tightening phase,” said Etsuko Yamashita, chief economist at SMBC.
MSCI’s Asia Pacific index excluding Japan, which snapped five straight sessions of losses on Monday, was up 0.08%.
The Shanghai stock market rose more than 1% by 11:20 am, compared with a rise of 0.38% before the Chinese inflation data came out. On Monday, it jumped 2.5% on market rumours of the inflation data.
Japanese stocks edged higher to log a 10-month closing high. The Nikkei average ended up 0.20% at 10,746.67.
South Korea’s KOSPI gave up some initial gains, weighed by falls in automakers including Hyundai Motor, while Hong Kong stocks fell 0.45%.
Euro inches up, but trend weak
In the currency market, the euro edged up 0.24% to around $1.3520 , after falling as low as $1.3426 overnight, as traders tried to take out stop-loss orders.
But uncertainty remained over concrete solutions to Europe’s fiscal problems, keeping the euro vulnerable. Worries about rescue plans for ailing German lender WestLB have also added to the single currency’s struggle.
On Monday, euro zone finance ministers agreed that a permanent rescue mechanism, the European Stability Mechanism, to be set up from 2013, would total €500 billion, but are waiting for leaders’ guidance to agree changes to the existing bailout fund.
Traders are also focusing on US retail sales data for clues on the dollar’s near-term outlook. The figures, due later in the day, are expected to show a 0.6% rise in January from the previous month.
“The greenback may regain its footing over the next 24 hours of trading as the economic docket is expected to reinforce an improved outlook for future growth,” said David Song, currency analyst at DailyFX.
European GDP data, also due out on Tuesday, is expected to show slight growth in the euro zone.
Against the yen, the dollar rose 0.18% to around ¥83.45, nearing a three-week high of ¥83.68 set on Friday.
There was muted reaction after the Bank of Japan left its policy rate unchanged steady, as expected.
The Aussie rose to the day’s high of around $1.0058 after China’s CPI data eased worries about aggressive monetary tightening by the world’s No.2 economy, which attracts Australian exports.
Subdued expectations of more aggressive rate hikes by China also helped send three-month copper on the London Metal Exchange to as much as $30 to $10,190 a tonne. Spot gold also inched higher.
London crude prices extended gains to stand above $103 a barrel, buoyed by signs of firm oil demand in China, and as unrest in the Middle East sparked fears of a potential supply disruption.
US crude for March delivery rebounded above $85 a barrel, after falling to 2-1/2 month lows in the previous session.