Singapore: Asian stocks slid on Wednesday following a broad commodities sell-off but the US dollar edged higher after stronger-than expected US factory data offered further evidence of an economic recovery.
Oil fell for a second day as investors took profits from a sharp year-end rally. Gold inched up, though, after sinking more than 2% in the previous session.
The fall in commodities to their lowest level in seven weeks weighed on shares of resource companies in early Asia trade, although market analysts said it was likely to have a limited impact.
“I would expect Asian stocks to be slightly weaker although in Japan the weaker yen will probably help its important export sector,” said Jamie Coutts, a technical analyst at BGC Securities in Tokyo.
The MSCI index of Asian shares excluding Japan fell 0.50% while Japan’s benchmark Nikkei was little changed, shrugging off concerns about the lower commodity prices and holding on to the previous day’s gains.
But analysts say stocks will likely continue to be supported by optimism that the US economy is gathering momentum, albeit slowly.
“Investors are focusing on the US payroll data this week (Friday), so they may stay on the sidelines for this week, but the mood is positive,” said Hiroichi Nishi, general manager at Nikko Cordial Securities.
The US dollar bounced from three-week lows against the euro on Tuesday and held firm in early Asia trade at around ¥82 after the upbeat US maufacturing data, and more gains are seen likely given the heavy sales of euro zone bonds anticipated this year.
The dollar index which measures the greenback’s performance against a basket of currencies rose 0.2 % to its highest level since 30 December.
“Incoming US data is quite good and that’s part of the reason why I think the dollar is going to remain with a reasonable bid tone,” said Richard Grace, chief currency strategist at Commonwealth Bank.
There was little reaction in Asian markets to minutes of the Federal Reserve’s December meeting released on Tuesday, which revealed policy makers felt the US economy still needed help despite signs of strength.
The US economy, having emerged from its deepest recession in generations in the summer of 2009, has since expanded in fits and starts. Gross domestic product rose at a 2.6% annual rate in the third quarter, a pace still seen as too low to bring down the country’s 9.8% jobless rate.
Data showed new orders received by US factories rose in November and orders, excluding transportation, recorded their largest gain in eight months.
The stronger dollar weighed on copper futures after prices slid from record highs in the previous session that saw commodities suffer their biggest daily fall in seven weeks.
Crude oil slipped 20 cents to $89.18 a barrel after sliding 2.4% on Tuesday, but spot gold rose 0.3 % to $1,383.40 an ounce.
(Additional reporting by Ian Chua in SYDNEY, Editing by)