Hong Kong: The dollar edged further away from 14-month lows on Monday as investors trimmed bets against the beleaguered US currency, while Hong Kong and South Korean stocks dragged down other Asian markets on worries third-quarter earnings may not live up to expectations.
Trading was limited due to a holiday in Japan and with most US markets closed later in the day for Columbus Day.
Chinese shares lost early gains to profit-takers, with worry over huge supplies of new shares from new share sales offsetting the impact of market-friendly Central government measures on the mainland.
Investors were starting to get nervous about the earnings season, as economic data out of the US in the past few weeks has suggested that its rebound from a deep recession may be losing momentum.
“Shares are likely to be volatile for some time, as investors increasingly want to confirm with their own eyes whether economic data and results are in line with earlier hyped-up expectations,” said Hong Soon-pyo, a market analyst at Daishin Securities in Seoul.
Quarterly results from major US banks and companies this week are seen as a key reality check for whether a seven-month rally in stocks this year has more legs. Among those reporting are Intel Corp. on Tuesday and JPMorgan Chase and Co. on Wednesday.
“Cost cutting has been the main driver of second-quarter earnings, but the main focus in Q3 is the ability to generate revenue,” said analysts at Calyon in a note to clients.
The MSCI index of Asia-Pacific shares outside Japan dipped about 0.2%, with material and financial shares among the biggest drags. But for the year, the index is up about 62%.
Equity indexes were mixed across the region, with India’s benchmark up 2.3% and Singapore gaining more than 1%, while China, South Korea and Australia all dropped, albeit by less than 1%. Hong Kong’s Hang Seng index fell 0.9% followed by a 0.6% drop in the Shanghai Composite.
South Korea’s Kospi shed 0.4%, hurt by heavyweights such as Samsung Electronics Co. Ltd and steel giant Posco.
Shares of Posco, the world’s fourth largest steel maker, dropped 0.7% before what is expected to be upbeat earnings and guidance on Wednesday. According to data from Thomson Reuters StarMine, Posco is likely to post a positive surprise in earnings compared with median estimates.
The dollar won a brief reprieve late last week from a steady slide that has raised worries about the waning status of the world’s reserve currency and prompted some central banks in Asia to intervene in foreign exchange markets to stem corresponding gains in their own currencies.
The dollar index, a gauge of its performance against six major currencies, was almost flat around 76.20 after falling as far as 75.767 last week. The dollar climbed 0.6% to 90.22 yen while the euro was flat around $1.473.
The dollar has been battered by investors shifting funds out of US treasurys and money markets and into emerging market assets, and by worries that central banks are cutting their share of foreign reserves held in dollars.
Gold edged up near last week’s record but the dollar’s rebound as well as worries about falling jewellery demand in main consumer India were likely to limit gains. Spot gold quoted around $1,055 an ounce, within striking distance of a lifetime high of $1,061.20 an ounce hit on Thursday. Bullion gained almost 5% last week, its best weekly performance in nearly half a year.
Oil futures rose nearly 2% to around $73 a barrel on growing optimism about the pace of the global economic recovery and a positive demand forecast from the International Energy Agency, which said world oil demand will recover at a faster pace than expected for the rest of the year and next.