Hong Kong: Asian stock markets dropped on Tuesday amid worries about the staying power of a three-month rally. European shares edged modestly higher in early trade.
Major Asian markets such as Tokyo and Hong Kong shed around 1%, while the dollar slipped against the yen. Crude oil prices climbed above $69 (Rs3,284.4) a barrel.
Stocks worldwide have surged since March, pushing a number of markets upward 30% and more, on expectations that the deepest stretch of the global recession may be over.
But uncertainty about the strength of any recovery is now leading many investors to question whether the recent rally may have overvalued companies.
Uncertain times: A stock price monitor in Shanghai, China. The Shanghai index rebounded from the red to close higher by 0.7%. Eugene Hoshiko / AP
The threat of inflation, as governments spend hundreds of billions and cut interest rates to historic lows to prop up their economies, is also unsettling investors more and more. A downgrade of Ireland’s debt rating overnight only added to fears about the unhealthy consequences of massive government bailouts.
“Investors are a bit cautious and happy to be taking some profits,” said Miles Remington, head of Asian sales trading at BNP Paribas Securities Services in Hong Kong. “You’re caught between a rise of such speed and tremendous gains versus other concerns. So, in the short term there could be some downside.”
As trading opened in Europe, Britain’s FTSE 100 was up 0.1%, Germany’s DAX gained 0.2% and France’s CAC-40 advanced 0.2%. Wall Street futures pointed to a weak open in the US. Dow futures fell 11 points, or 0.1%, to 8,748 and S&P futures dropped 1.3, or 0.1%, to 937.50.
Asia fared worse, with Japan’s Nikkei 225 stock average losing 78.81 points, or 0.8%, to 9,786.82. Hong Kong’s Hang Seng fell 1.1% to 18,058.49, and South Korea’s Kospi was off 1.5% at 1,371.84.
Taiwan’s market, which has surged nearly 50% from lows in March, slid 3.2% in the region’s worst performance of the day. Australia’s benchmark was also lower, while Singapore recovered losses to be slightly higher.
In mainland China, Shanghai’s index rebounded from the red to close higher by 0.7%, helped by optimism that news due this week about the country’s economy will show signs of improvement.
Figures about China’s exports and imports, due Thursday, could yield clues about the health of the world’s third largest economy, as well as global appetite for Asian-made goods.
The region’s economies have gotten clobbered by the collapse in demand from the US and other Western countries, though the sharp decline may be slowing and even turning around in some countries.
Taiwanese exports, for example, dived 31% last month from the same period a year earlier—a slight improvement over April’s abysmal 34% decline, new figures showed. And they’ve actually shown a steady increase recently by a different measure, growing almost 38% in the three months ending May from the prior three months.
Wall Street’s session was largely directionless as investors wavered between concerns the rally is overheating and fears of missing any more upside.
The Dow closed mostly flat, up 1.36, or less than 0.1%, at 8,764.49. The Standard and Poor’s 500 index slipped 0.95, or 0.1%, to 939.14.
Oil prices rose in Asia as traders mulled whether a weak global economy justified a doubling of crude since March. Benchmark crude for July delivery was up $1.10 to $69.19 a barrel; the contract fell 35 cents overnight.
In currencies, the dollar edged down to 98.17 yen (Rs47.12) from 98.39 yen. The euro fell to $1.38 from $1.39.