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Asian markets down, euro up ahead of ECB meeting

September 04, 2012

Trader at Tokyo Stock Exchange — File Photo
Trader at Tokyo Stock Exchange — File Photo

HONG KONG: Asian markets fell on Tuesday but the euro rose as attention turns to a European Central Bank policy meeting later in the week, with dealers hoping for plans to restart a bond-buying programme.

With US markets closed for the Labour Day holiday on Monday and few catalysts, regional investors took a wait-and-see approach with the ECB meeting on Thursday as well as closely watched US jobs figures due on Friday.

Tokyo slipped 0.10 per cent, or 8.38 points, to 8,775.51, Sydney fell 0.61 per cent, or 26.2 points, to 4,303.5 and Seoul lost 0.29 per cent, or 5.58 points to 1,907.13.

In the afternoon Hong Kong was 0.26 per cent lower and Shanghai fell 0.68 per cent.

Expectations rose that the ECB would announce a new round of sovereign bond purchases after European lawmakers said the bank's head, Mario Draghi, had indicated such a move.

With struggling economies such as Spain, Italy and Portugal desperate for help to push down their borrowing costs Draghi said any central bank intervention would include only short and medium-term debt, the lawmakers said.

He said in a closed-door meeting that bond-buying in the past was justified to help stabilise and protect the 17-nation eurozone, they added.

“The only question is whether or not it (the ECB) will print more money between now and November,” Nicholas Smith, equity strategist at CLSA in Tokyo, told Dow Jones Newswires.

Draghi's comment helped push the euro to a two-month high of $1.2627 Tuesday at one point in Asia, compared with $1.2598 late Monday in London trade. However, it later eased to $1.2609 in the afternoon.

It also fetched 98.83 yen, compared with 98.68 yen. The dollar was at 78.38 yen against 78.32 yen.

Investors brushed off Moody's decision to lower the European Union's long-term issuer rating outlook from stable to negative.

They also looked past news that Spain's indebted Andalusia region, the country's most populous that has a 33.9 per cent unemployment rate, would seek a one-billion-euro “advance” from Madrid to provide liquidity.

There was also little reaction to data that showed eurozone manufacturing activity contracted for a seventh straight month in August.

A purchasing managers index survey of thousands of eurozone manufacturers compiled by research firm Markit came in at 45.1 in August. While it is up from 44.0 in July it still shows the sector is deep in contraction.

Any score below 50 indicates shrinkage.

Asian markets mostly rose on Monday on stimulus hopes after figures showed manufacturing in giants China and India continued to weaken.

Also in traders' sights was the release of jobs figures out of the United States as they look for clues on the state of the world's biggest economy with its recovery stuttering.

Another weak result would stoke expectations for another round of bond-purchasing by the Federal Reserve, or quantitative easing.

Oil prices rose, with New York's main contract, light sweet crude for delivery in October, advancing 80 cents to $97.27 a barrel in the afternoon and Brent North Sea crude for October delivery gaining 32 cents to $116.10.

Gold was at $1,693.80 at 0630 GMT compared with $1,688.65 on Monday.