Singapore: Asia shares fell on Wednesday as surprise drops in US consumer confidence and German business sentiment fueled fears about the strength of the global economic recovery and boosted safe haven currencies such as the yen.
US stocks suffered their biggest one-day drop in nearly three weeks after data showed US consumer confidence in February slumped to a 10-month low while house prices fell, heightened concerns about the health of the world’s largest economy.
Adding to investor slittishness in Asia, China implemented fresh measures to clamp down on excessive bank lending which it fears could create destabilising asset bubbles.
China’s banking regulator has told commercial lenders to restrict new loans to local governments’ financing arms to ward off potential risks of default, state media reported, the latest step by Beijing to rein in galloping credit expansion.
Japan’s Nikkei fell 1.8% while the MSCI index of Asian shares excluding Japan shed 1%.
Shares in Hong Kong fell 1%, while Shanghai shed 0.2%.
“The market is now in a place where investors are closely watching economic indicators for clues on the future direction, with earnings reports having run their course. It tends to react nervously to each set of data,” said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.
The yen, widely seen as a haven in times of market turmoil, held on to hefty gains made in the previous day while the dollar stayed firm against the euro as investors sought to limit their exposure to riskier assets.
The dollar was near 90.20 yen after a nearly 1% drop on Tuesday.
Germany’s much watched Ifo business climate index fell unexpectedly as a result of harsh winter weather that weighed on the construction and retail sectors. The data hinted Europe’s largest economy could slide back into contraction in the first quarter.
And a Fitch Ratings credit downgrade of Greece’s four largest banks reminded investors of the fiscal problems in Athens and the lack of clarity from the euro zone on how it might aid one of its members.
Gold edged up to $1,106 an ounce after falling 1% the previous day as the dollar firmed and other commodities dropped followed the worrying US consumer confidence data, which triggered worries about demand.
Many economists believe there can not be a strong, sustainable global recovery until US shoppers start buying again and the housing market stabilises.
Others fear that even if there is a rebound, it could be a jobless recovery where the economy is still too weak to create many new jobs. Data on Tuesday showed the number of mass layoffs by US employers edged up in January as manufacturers stepped up staff cuts.
Oil prices rose 36 cents to $79.22 a barrel after data from the American Petroleum Institute showed crude inventories in the world’s biggest oil consumer nation fell by 3.1 million barrels.