Hong Kong: Asian stocks briefly reached a one-month high on 4 September with a big bank deal in South Korea helping lift sentiment, but the major currencies held steady ahead of a batch of influential US data due this week.
Tokyo’s Nikkei slipped as investors worried about recent disappointing economic data, while safe-haven Japanese government bonds (JGBs) were unsettled ahead of the results of an auction of 10-year notes.
“The worst from the US subprime mortgage crisis appears to be over, and the main question left is whether the Fed will lower interest rates at its 18 September meeting,” said Kim Hak-kyun, an analyst at Korea Investment and Securities.
After earlier reaching levels last seen on 1 August, MSCI’s measure of Asia Pacific stocks excluding Japan pared back to be up a modest 0.3% by 0224 GMT.
Tokyo’s Nikkei average fell 0.4% by the end of morning trade, extending Monday’s 0.3% decline.
Among individual stocks, Korea Exchange Bank jumped 7.2% after Europe’s biggest bank HSBC agreed on Monday to buy 51% of the South Korean lender.
HSBC’s Hong Kong shares edged down 0.1% in early trade.
Investors also dumped CSR, sending its shares down 5.4% after the Australian conglomerate gave a disappointing annual earnings forecast.
The MSCI index has risen in the past two weeks and is now up 19% from a five-month trough plumbed on Aug. 17 but still down about 5 percent from its July 24 record high.
Markets have generally been on the recovery path since the Fed slashed a key bank lending rate on Aug. 17 to help soothe fears of a credit shortage stemming from the U.S. subprime mortgage crisis.
Comments from US President George W. Bush and Fed Chairman Ben Bernanke late last week about tackling the credit problem have further helped shore up sentiment.
But data on Monday showing Japanese firms unexpectedly cut capital spending by 4.9 percent in April-June from a year earlier weighed on the Nikkei.
“There’s no doubt that these figures raised doubts about Japanese domestic consumption and this has led to some selling of related shares. There really is no big reason to buy,” said Tsuyoshi Nomaguchi, strategist at Daiwa Securities.
“But trade in Tokyo is going to be pretty light, with a lot indicators due out in the US this week and investors are waiting to see.”
That wait-and-see mood was evident in the forex market, with the major currencies little changed after trading in a narrow range on Monday, dulled by the US Labor Day holiday.
“There’s more selling interest than buying for the dollar, the euro is top-heavy and there is little reason to buy the yen from the interest rate prospect. The market is likely to move sideways as players wait for U.S. data for direction,” said a senior dealer at a European bank.
The dollar bought 115.86 yen little changed from 115.97 yen in London trade on Monday, while the euro was at $1.3616 compared with $1.3624 in London.
Against the yen, the single currency was also steady near 157.79 yen.
Among commodity prices, US crude was steady just above $74 a barrel, staying buoyed after OPEC kept a lid on output in the run-up to its Sept. 11 ministerial meeting, while spot gold was barely changed at about $672 an ounce.
The benchmark 10-year JGB yield eased two basis points to 1.615%, after earlier touching a near three-week high of 1.645%.
The Ministry of Finance offered 1.9 trillion yen in 10-year JGBs with a 1.7% coupon in an auction that will close at 0300 GMT. Results are due at 0345 GMT.