Calm returns to Asia stocks as US data boosts dollar

Hong Kong: Calm returned to Asian markets on Wednesday, with equities stabilising after a two-day rally, as the dollar strengthened on upbeat US economic data.
Volatility eased as traders focused on the world economy and corporate earnings after a week dominated by the dramatic spike in tensions over North Korea, which triggered a global sell-off before prices bounced back on Monday.
The greenback rose after official figures showed US consumers splurged in July, with retail data spurred by strong auto and department store sales.
However, Wall Street finished little changed as the strong statistics were offset by disappointing earnings reports.
The Nikkei, which made strong gains on Tuesday after finishing at its lowest level for more than three months the previous day, ended marginally down in light trade, even as the weakening yen boosted exporters.
Hong Kong shares rose on Wednesday as investors took heart from strong quarterly earnings despite signs of slowing growth in China.
The Hang Seng index ended up 0.9 per cent at 27,409.07 points, while the China Enterprises Index gained 0.7 per cent to 10,817.88.
“Many company results have been coming in above expectations, and some sectors in particular, like raw materials, shipping and non-ferrous metals, are seeing a significant improvement over last year,” said Huang Bo, an analyst at Guotai Junan Securities in Hong Kong.
“From this we can see that Hong Kong is still enjoying a clear bull market.”
Hong Kong investors were unperturbed by data showing that China’s new loans in July fell to their lowest in 8 months.
Slowing credit growth lends credence to expectations that China’s economic activity will slow in the second half, though most analysts believe there will be only a gradual cool down, not a sharp decline.
Shares in Cathay Pacific Airways Ltd ended up 0.9 per cent. The airline, which is under strong pressure from state-supported mainland China carriers, had been due to announce first-half earnings at 12 pm Hong Kong time (0400 GMT), but had not done so as of the market’s close.
Seoul, which was closed on Tuesday for a public holiday, also rose by the close of play.
“Volatility declined on international markets… with US stock markets returning to their moribund state,” said Ric Spooner, an analyst at CMC Markets in Sydney. “This has provided a neutral lead for the local market where the main focus will be on the profit reporting season.”
Shanghai edged lower but traders appeared to shrug off a warning from the IMF on Tuesday that China’s massive debt is on a “dangerous trajectory”, raising the risk of a sharp slowdown in growth. The International Monetary Fund urged the world’s second largest economy to change course and press on with structural reforms, even as it maintained its forecast of 6.7 per cent growth for this year.
The US retail sales data increased expectations of a December rate hike by the Federal Reserve, offering more support to the greenback’s recovery after it slumped to eight-week lows under 109 yen at the height of the North Korea crisis last week.
“It’s another sign the US economy is on the track the Fed has articulated,” said Greg McKenna, an analyst at AxiTrader.
Minutes due later on Wednesday from the latest Fed meetings will be scrutinised for clues after policy makers have indicated they may announce plans to reduce the central bank’s balance sheet in September and possibly raise interest rates again this year.
European stock markets advanced at the start of trading, with London’s benchmark index rising ahead of British jobs data. — AFP