HONG KONG: Japanese stocks finally turned negative Wednesday after six-straight gains, while most other Asian markets moved cautiously following losses in New York and Europe and after the IMF cut its growth forecasts for the world economy.
The Nikkei in Tokyo has surged more than 10 percent during its rally — fueled by hopes for stimulus measures as well as a weaker yen — and investors decided it was time to cash in.
By the break the index was down 0.7 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 Washington-based 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, denting what was already a 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 $1.3071 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 and Sydney were each up 0.4 percent but Shanghai shed 0.2 percent and Seoul was 0.3 percent lower.
“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 — at the same time US data indicates the Federal Reserve could hike interest rates this year — is keeping pressure on the yen.
In the morning the dollar bought 106.02 yen, down from 106.08 yen in New York but well up from the 100 yen levels touched just two week ago.
Key figures at 0230 GMT
Tokyo – Nikkei 225: DOWN 0.7 percent at 16,602.90 (break)
Hong Kong – Hang Seng: UP 0.4 percent at 21,758.27
Shanghai – Composite: DOWN 0.2 percent at 3031.64
Pound/dollar: DOWN at $1.3071 from $1.3101
Dollar/yen: DOWN at 106.02 yen from 106.08 yen
Euro/dollar: DOWN at $1.1008 from $1.1023
New York – DOW: UP 0.1 percent at 18,559.01 (close)
London – FTSE 100: UP less than 0.1 percent at 6,697.37 (close)