Singapore: Asian shares steadied on Friday after falling nearly 2% this week amid concerns about the looming US “fiscal cliff”, while Japanese stocks rallied for a second day on expectations of further monetary policy easing after an election next month.
The yen held near a six-and-a-half month low plumbed against the dollar after Shinzo Abe, leader of the main opposition Liberal Democratic Party and likely to be Japan’s next leader, called on Thursday for the country’s central bank to adopt interest rates of zero or below zero to spur lending.
Away from Japan, investors remained wary of buying riskier assets, spooked by uncertainty about the US budget tussle, the euro zone’s relapse into recession and violence in the Middle East. Oil was on course for a weekly loss and US stock index futures weakened.
President Barack Obama and Congressional leaders begin budget talks on Friday, amid fears the United States will stumble back into recession if no deal is reached to avoid some of the $600 billion in spending cuts and tax hikes due to start taking effect in January.
“The latest comments from key players reinforces to us that the two sides are starting negotiations from rather distant points,” said Sean Callow, senior currency strategist at Westpac bank in Sydney, in a note.
“There will be plenty of negative headlines in coming weeks that weigh on risk assets and boost dollar, which is yet again trading like a safe haven even when the bad news is generated by the US. We doubt there will be a deal before late December.”
MSCI’s broadest index of Asia Pacific shares outside Japan was flat, leaving the measure on course for a weekly loss of around 1.8%.
But Tokyo’s Nikkei share average jumped 1.9%, adding to a rise of nearly 2% on Thursday, with gains again led by exporters such as Canon Inc. and Nissan Motor Co Ltd that benefit from a weaker currency.
“Expectations on how the new (ruling) party will tackle (Japan) deflation are offsetting persistent concerns on the US’s fiscal cliff for now,” said Hiroichi Nishi, general manager at SMBC Nikko Securities.
The dollar has rallied more than 2% against its Japanese counterpart over the past two sessions after Japanese Prime Minister Yoshihiko Noda said he was ready to dissolve parliament’s lower house on Friday for an election on 16 December.
The yen traded little changed around 81.15 per dollar on Friday.
“The substantial weakening of the yen in the past 48 hours has a lot of people rethinking their game plan,” Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.
The euro weakened a touch to $1.2770, still well above Tuesday’s two-month low of $1.2661.
S&P 500 index futures fell 0.2%, after Wall Street stocks closed little changed on Thursday.
Commodities markets were subdued, with Brent crude dropping a few cents to just below $108 a barrel while US crude firmed a fraction to just shy of $85.48.
Both benchmarks were on course for a losing week, as global growth concerns outweigh the upward pressure on prices from rising tension in the Middle East following Israel’s strikes against Palestinian militants in Gaza.
Gold, which has tended to track riskier commodities in recent months as safe-haven seekers favour the dollar and Treasuries, eased towards $1,713 an ounce, on course for a weekly loss of around 1%.
Copper bucked the trend, however, rising 0.2% to around $7,655 a tonne, on track for its first weekly gain in six weeks, amid signs that China’s economy, a key source of demand for the industrial metal, bottomed out in the third quarter. Reuters