Tokyo: Asian shares fell on Thursday as weak euro zone data, a sluggish debt auction in Italy and fears of a potential run on Cyprus’s banks stoked investors’ concerns about instability in Europe.
European markets were seen subdued, with financial spreadbetters predicting London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX to open down as much as 0.3%.
Benchmark indices in Spain and Italy were likely to open flat and 0.3% lower respectively. A 0.4% fall in US stock futures pointed to a weak Wall Street start.
Japan’s Nikkei stock average closed down 1.3%, as euro zone worries prompted profit taking in exporters and financials.
The negative tone for Asian equities was compounded by the latest restrictive move by China, with its banking watchdog ordering banks to strengthen checks on the underlying assets of a range of wealth management products to ward off potential risks to the financial system.
The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%, wiping out the previous day’s gains, which had taken the index to a one-week high.
Thursday is the last trading day for the first quarter for many Asian markets, which will be closed on Friday for the Good Friday holiday.
The pan-Asian index was set for its smallest quarterly gain since the second quarter last year with a 0.9 percent rise, which would also be its worst first quarter in four years.
“Multiple factors are denting sentiment, with uncertainties over the future of Cyprus despite the bailout, Italian political instability and bad economic indicators from the euro zone,” said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.
Despite their recent retracement, Asian shares outside of Japan have generally stayed in a range for the first three months of 2013, holding near the upper end close to their highest levels since August 2011, as improving US economic growth and hopes China will stay on a recovery track helped boost investors’ risk appetite.
“China’s move to tighten property regulations has been the biggest drag for Asia. Looking ahead, whether China can keep recovering will be the main issue speficic to this region,” Yuihama said, adding that Southeast Asian markets may be exposed to the biggest adjustments if negative news spurred broader selling.
China shares, by far the worst regional performer on Thursday, were headed for their worst loss in nearly a month, hurting Hong Kong markets, with banks taking a hit after they were ordered to tighten control over wealth management products (WMP) and improve transparency.
Hong Kong shares slid 1.3% and Shanghai shares slumped 2.7%.
“The timing of the announcement caught the market by surprise, although people were already expecting the regulators to act,” said Hong Hao, chief strategist at Bank of Communication International Securities.
Trading slowed generally as market players closed positions ahead of the Easter holidays.
“Whatever is happening in Europe in terms of Cyprus and the ramifications of that, maybe a lot of traders just don’t want to be long or don’t want to have positions over this long weekend,” said Winston Sammut, investment director at Maxim Asset Management.
Cypriots are expected to besiege lenders in the morning as banks reopen for the first time in almost two weeks.
Authorities imposed restrictions on cash withdrawals and may curb the use of credit cards abroad to keep a rein on money flows after the country agreed to a bailout deal that will wipe out some senior bank bondholders and impose losses on large depositors.
In Italy, the government’s cost of borrowing over five years rose to its highest since October at an auction on Wednesday, reflecting investor wariness over a lack of progress in forming a new government and worries about Cyprus’s bailout.
Meanwhile, data on Wednesday showed confidence in the euro zone economy fell more than expected in March after four straight months of gains.
“Headline risks for the euro should persist, although a positive turn of events in either country would probably come as a greater surprise given the market’s subdued expectations,” said Vassili Serebriakov, strategist at BNP Paribas.
The euro was at $1.2789, hovering near a four-month low of $1.2750 touched on Wednesday.
The dollar was down 0.1% but still near Wednesday’s 7-1/2-month peak of 83.302 against a basket of key currencies .
Fears about the euro zone underpinned safe-haven US Treasuries and gold, while 10-year Japanese government bond yields fell to 0.51%, the lowest level since June 2003, on expectations strong stimulus measures will be announced by the Bank of Japan next week at its first policy meeting under new leadership.
Such anticipations drove the BOJ’s benchmark interest rate down on Wednesday to 0.059%, the lowest since since 13 July 2006, which was one day before the central bank ended its policy to keep the overnight call rate effectively at zero percent.
US crude futures rose 0.2% to $96.77 a barrel while Brent added 0.3% to $110.
London copper eased 0.2% to $7,590.50 a tonne, with prices set to end the month and quarter down due to a lack of robust Chinese demand.