HONG KONG: Japanese stocks finally fell on Wednesday after six straight days of gains, and most other Asian markets moved cautiously following weak leads from New York and Europe and a cut in the IMF’s world growth forecast.
The Nikkei in Tokyo had surged more than 10 percent during its rally—fuelled by hopes for stimulus measures as well as a weaker yen—and investors decided it was time to cash in.
The index ended down 0.3 percent.
While the Dow on Wall Street closed at another record, the broad lead from Europe and New York was tepid after the International Monetary Fund lopped 0.1 percentage point off its outlook for the global economy for both this year and next.
The Fund pointed to last month’s shock vote for Britain to leave the European Union, saying it had darkened the skies in that country and across the euro area and dented an already fragile recovery.
It also downgraded its 2016 growth estimate for the British economy by 0.2 percentage points, putting renewed pressure on sterling, which eased to $1.3087 in Asia and back towards the three-decade lows hit after the June 23 vote.
Adding to the downbeat mood in Europe, a key survey showed Tuesday that investor confidence in Germany fell to its lowest level in nearly four years in July on concerns about the Brexit fallout.
Asian markets moved more cautiously than they have in the past week, although confidence that central banks will introduce more monetary easing measures is providing some support.
Hong Kong added 1 percent, having fallen Tuesday for the first time after a six-session winning streak.
Sydney ended up 0.7 percent but Shanghai shed 0.3 percent and Seoul was 0.1 percent lower.
In early European trade London rose 0.4 percent, Frankfurt added 0.7 percent and Paris put on 0.6 percent.
Turkish lira sinks
“The rally is losing some momentum as the [corporate]reporting season heats up,” said Niv Dagan, executive director at Peak Asset Management LLC in Melbourne.
“We’re staying cautious and taking a little bit of profit off the table. With the equity rebound stalling, we are really looking for positive momentum from the reporting season” for the next leg-up in stock markets, he told Bloomberg News.
However, Stephen Innes, senior trader at OANDA Asia Pacific, said the upward momentum would likely continue as dealers await central bank moves.
“Post-Brexit speculation of easy money continues to support equity markets. The availability of easy money is showing little sign of abating . . . and risk sentiment should remain buoyant for the foreseeable future,” he said in a note.
Speculation that Japan’s government and central bank will step up their stimulus drive—along with expectations of a US interest rate rise this year—is keeping pressure on the yen.
In the afternoon the dollar bought 106.40 yen, up from 106.08 yen in New York and well above the 100 yen levels touched just two week ago.
The Turkish lira plunged 2 percent as traders fretted over a government crackdown following the weekend’s failed coup, while the central bank cut interest rates. The country has been thrown into turmoil by the deadly events and the resulting purges have fuelled uncertainty.
Ratings agency Moody’s said it would “assess the medium-term impact” of the crisis before deciding whether to lower Ankara’s credit rating.