Hong Kong: Asian shares fell on Tuesday as a report of fresh missile tests by North Korea added to market tensions at a time when investors are questioning if they are too optimistic about the global economic outlook.
The big picture: Screens show share prices at a gallery in Kuala Lumpur. Among the global data that could help determine the course of markets this week is US housing and consumer confidence. Reuters
Seoul shares fell 2.1% and Tokyo slipped 0.4% after North Korea was roundly condemned for raising international tensions following a nuclear test on Monday.
A report that North Korea had fired more missiles on Tuesday came after both Seoul and Tokyo markets had closed.
The dollar edged higher, but remained near a five-month low hit last week against a basket of currencies, as profit-taking hit higher-yielding currencies that had benefited from hopes the worst of the global economic crisis was now over.
Asia has grown accustomed to Pyongyang’s sabre-rattling so analysts generally believe the market impact of the missile tests will be short-lived.
But the tensions are occurring as optimism about the strength and speed of a global economic recovery is being replaced by some doubts.
“As was the case with the nuclear test yesterday, news of yet another North Korean missile launch would have a relatively short-lived impact on markets. This will actually offer opportunities to buyers to pick up stocks at lower prices,” said Lee Kyoung-su, an analyst at Taurus Investment and Securities.
“Market participants are more concerned with macroeconomic factors, such as a batch of data from the United States due out this week. More falls are expected if the data proves to be disappointing,” added the Seoul-based analyst.
Consumer sentiment figures from South Korea and manufacturing data from Singapore on Tuesday added to recent reports offering some signs that the first quarter marked the trough of the global downturn.
The question now is how soon, or fast, a recovery will take shape.
Among the global data that could help determine the course of markets this week is US housing and consumer confidence. The MSCI index of Asian stocks outside Japan fell at least 1%.
A rally that had taken the regional gauge up more than 50% from its year low in early March to its 2009 high last week has stalled in the past several sessions.
Indian stocks lost the most in the region with a 2.3% fall. Singapore shed 1.3% while Hong Kong, Shanghai and Taipei all lost 0.8%.
Australian stocks, however, rose 1.4% after Rio Tinto Group sparked gains in iron ore miners after announcing a smaller-than-expected cut in iron ore contract prices.
The dollar index, which weighs the dollar against six major currencies, edged up 0.8% to 80.641, though that was not too far off a five-month trough of 79.805 hit on Friday.
The US currency was routed last week on fears that the US would lose its top AAA rating due to its widening debt levels during the financial crisis.
A test of whether investors are willing to continue financing the US deficit will come this week when the US treasury sells $101 billion in treasury notes spread out from Tuesday through Thursday.
The euro remained under pressure, partly due to profit-taking after a recent rally of about 8% in a month against the dollar and after Germany’s Ifo measure of corporate sentiment rose lesser than expected, as well as a report in Britain’s Daily Telegraph questioning the health of the German banking system.