Hong Kong: Asian stocks retreated on Friday and the dollar edged up after a disappointingly big drop in US employment prompted investors to pull back from commodities, resource-linked shares and higher-yielding currencies.
But the equity market decline across Asia was limited as the report showing that US companies slashed nearly half a million jobs in June did not shake hopes that a slow recovery is under way.
The Australian dollar, whose 12% surge against the US dollar this year has been closely tied to the four-month rally in stocks, edged up as the US payrolls report had limited fallout.
Analysts at Rabobank said the US jobs report was a “reality check” for investors who had become overly optimistic about how quickly the global economy could recover from its deepest recession in decades.
Oil and copper extended their slide. US crude struck a one-month low and was down 27 cents a barrel at $66.46. Government bonds jumped, with the benchmark Japanese 10-year yield touching a three-month low.
“Share losses were limited as investors here did not necessarily take it as a sign of a further slowdown of global economies. Belief that economic fundamentals are near their bottom is still firm here,” said Won Jong-hyuck, a market analyst at SK Securities in Seoul.
The MSCI index of Asia-Pacific shares outside Japan dipped 0.6% and was down about 1% during the first three trading days of the third quarter.
In the April-June quarter, the MSCI benchmark for Asian shares surged 32% - its biggest quarterly gain since 1993 - on investor hopes that Asia’s emerging economies would help lead the global economy out of the doldrums.
Japan’s Nikkei average shed 1%, dragged down by a 6.3% slide in Seven & I Holdings when the operator of department stores and supermarkets reported an unexpected drop in quarterly profit. Shares of oil distributor Nippon Oil lost 2.6%.
Asian stocks held up relatively well after the US S&P 500 slid 2.9% on the jobs data. US markets are closed later in the day in observance of the Independence Day holiday on Saturday.
In currencies, the dollar edged up as investors favoured the greenback as a safe haven while positions in riskier currencies and assets were cut.
The dollar index, a gauge of its performance against six major currencies, edged up slightly to 80.324.
The euro slipped slightly to $1.3990 from near $1.4003 in late New York trade, down from a one-month peak near $1.42 hit earlier in the week and hit by hedge fund selling before the long US weekend. The dollar was little changed at ¥95.96.
The worries about the recovery outlook added fuel to gains in government bonds.
The 10-year JGB yield was down 2.5 basis points at 1.330%, with some buying spurred after an auction of the maturity found solid demand the previous day despite a bigger monthly amount to help pay for stimulus spending.
But Japan’s low yields have prompted domestic investors to go abroad in search of higher returns.
Data from the Ministry of Finance on Thursday showed domestic investors snapped up 1.53 trillion yen ($16 billion) of foreign bonds in the weekend ending 27 June, the biggest such weekly purchases in four years. Analysts said those purchases were mainly concentrated in US Treasuries.