Asian shares gain, but economy fears remain

Asian shares gain, but economy fears remain

Hong Kong: Asian shares gained tentatively on Friday, recovering some of the steep losses in the prior session, after encouraging earnings signals from technology firms such as IBM eased some of the concerns over a global recession.

A strong day in Wall Street on Thursday, with the Dow Jones industrial average up more than 4%, helped underpin the gains, but investors remained largely cautious about the near-term outlook given continued signals the global economy is headed for a potentially deep recession.

The equity gains helped lift US crude futures by nearly $3 a barrel, and contributed to a halt in the dollar’s rally against the euro and other major currencies. Other commodities, however, tumbled amid worries about waning global demand.

“There’s still nervousness in the market about the real economy, but in terms of valuations the price is good right now," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Japan.

“The economic problems are the main theme of the market right now and everybody knows this, so rises will be limited."

The MSCI index of Asia-Pacific stocks outside Japan rose 0.6%, following an 8.2% slump in the previous day.

The index has advanced 0.4% for the week as of Thursday, and is headed for its first weekly gain since the end of August.

The gains came following encouraging signals on the earnings front. International Business Machines Corp (IBM), the biggest technology services company, said on Thursday it expects to meet long-term profit forecasts, partly due to continued growth in emerging markets.

Meanwhile US firms such as Internet search leader Google Inc and chip maker Advanced Micro Devices Inc posted results that beat expectations.

The earnings results helped take some of the sting off signals that the US economy is slowing. Data on Thursday showed industrial output posted its biggest drop since 1974 in September, while a regional factory index slumped and labour markets showed softness.

Japan’s Nikkei average rose 1.4%, clawing back after falling 11.4% on Thursday in its biggest loss since the 1987 crash.

Singapore’s stocks rose 0.3%, while Shanghai’s main index advanced 0.7%.

But other major indexes in the region fell. South Korea’s KOSPI dropped 3% amid continued nervousness about the health of the country’s banking sector.

Taiwan’s index was down more than 2%, while Australian stocks erased earlier gains to fall 0.7%.

The gains in equity markets, however tentative, bolstered oil prices. US crude futures for November delivery rose $2.7 to $72.59 a barrel, reversing a decline of more than 6 percent during US trade on Thursday.

Base metal prices also rallied with London Metal Exchange copper, zinc and lead all up around 5% in Asian trade.

The dollar retreated against the euro and a basket of currencies after most interbank lending rates fell on Thursday.

Steps by central banks to provide funds, improve bank balance sheets and open up credit lines to cash-strapped institutions have helped ease some of the concerns over a near freeze in short-term lending.

“The safety buying of the dollar may have peaked for now," said Hideki Amikura, deputy general manager of forex at Nomura Trust Bank.