Singapore: Asian stocks fell on Thursday as investors took profits after strong gains in recent weeks while the euro remained weak, waiting for the European Central Bank to flesh out lending rules likely to support debt-laden Greece.
European stocks were set to open weaker in line with Asian and US markets, although the focus will be on interest rate decisions by the Bank of England and the ECB later in the day.
Spreadbetters forecast Britain’s FTSE 100 opening as much as 0.5% down, Germany’s DAX down as much as 0.3% and France’s CAC 40 down as much as 0.7%.
S&P index futures were down 0.2%, implying a weak start to US trading later in the day after a 0.7% fall in the Dow on Wednesday.
In Asia, Tokyo’s Nikkei index slipped 1.1% to 11,168 points after reaching an 18-month high this week.
The MSCI’s broad measure of shares in the Asia-Pacific outside Japan was down 0.6% after running up gains of 4.86% since the beginning of the year, though traders expected any further declines to be limited as regional economic growth remains strong.
Thai stocks lost 2.6%, hit by fears of unrest after the government ordered a state of emergency to counter a four-week opposition protest on the streets of Bangkok.
But Thai stocks, up over 10% this year, are seen well-bolstered by an influx of foreign money into the market, while, in Tokyo, analysts pointed to expectations for improving corporate earnings as underpinning sentiment. For a graphic on foreign buying in Thai stocks, click on
“Though it’s still hard to say for sure, I think this is just an adjustment,” said Takashi Ushio, head of the investment strategy division at Marusan Securities, of the day’s fall. “After all, we have (company) results really starting up in about two weeks, and these are likely to prove supportive.”
In Indonesia, stocks ended the morning down 1.8% after reports that the central bank may be considering temporary capital controls after gains of 15% this year, although a deputy governor clarified there were no such plans.
The euro was weak around $1.33, its softest level in two weeks, and hovering near its March trough of $1.3267, which at the time was the lowest it had been since May.
Traders say loss-limiting sell orders would likely trigger below that point and they then expect some support at round numbers such as $1.3200 and $1.3100. But with the euro firmly in a downtrend, $1.30 is seen as the next psychological point.
The European Central Bank meets later and the market is waiting for it to flesh out new collateral rules that will extend easier lending terms into 2011.
An ECB official said the rules are not specifically designed to help Greece, but the changes did remove the threat hanging over the country that its sovereign debt might drop out of the pool of collateral.
The common currency was almost flat on the day, but has lost almost 7% against the dollar since the beginning of the year.
But there is underlying support in regional stock markets with top Asian companies at their most optimistic since the global financial crisis nearly two years ago.
A Reuters check-up of 100 leading Asian companies, from Japan to India, showed government stimulus-fuelled recovery across Asia had filtered through to the corporate sector, with the technology and resources industries leading the pack.
Of the 100 companies, 59 had a ‘positive’ to ‘very positive’ rating on their six-month outlook, its highest since Reuters started the review in mid-2009 and up from 38 in the December review.
“It certainly looks like we are in growth mode now and that companies are going to have record earnings in 2010,” said Todd Martin, Hong Kong-based Asia Equity Strategist at Societe Generale.
The Australian dollar firmed after data showed 19,600 jobs were added in March and full-time employment strengthened, all largely in line with forecasts but not enough to muster buying support in anticipation of another rate hike in May.
It lacked momentum to test key resistance at $0.9300, with talk of options-related selling near that level ahead of expiries expected later in the day.
Oil and gold both slipped in Asian trade. Gold was at about $1,146.45 an ounce after climbing as high as $1,152.75 an ounce, its strongest since mid-January, in New York on Wednesday on worries about Greece’s fiscal problems.
London copper futures extended losses, pulling back from a 20-month high struck this week on fears a rally of nearly 10% over the past two weeks had run ahead of itself.
Three-month copper on the London Metal Exchange dipped as low as $7,871, having touched $8,005 in the previous session and $8,010 on Tuesday, its highest since August 2008.