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Asian markets mixed before ECB meeting

July 5, 2012

HONG KONG: Asian markets were mixed in subdued trade today as investors took to the sidelines following recent gains and waited for a European Central Bank meeting amid expectations of an interest rate cut.

With no lead from the US which had been closed for a holiday, investors waited for the ECB meeting later in the day, as well as for an expected announcement of US$78 billion in fresh stimulus cash from the Bank of England.

The euro held steady against the dollar in cautious trade.

Tokyo closed 0.27%, or 24.37 points, lower at 9,079.80, and Seoul was flat, rising 0.06%, or 1.04 points, to close at 1,875.49.

Hong Kong was up 0.58% in afternoon trade, while Shanghai was more than 1.0% down on continued concerns about a slowdown in Chinese economic growth.

Sydney was flat, giving up 0.07%, or 3.0 point points, to close at 4,169.2 points.

Herald van der Linde, head of equity strategy Asia-Pacific at HSBC in Hong Kong, told Dow Jones Newswires markets were “taking a bit of a breather” after gains on last week’s EU summit deal to help the eurozone.

He added the ECB’s expected rate cut was not affecting regional bourses as “the market has already priced in a cut”.

Investors were also holding back ahead of key jobs data in the US to be released tomorrow, betting the figures will be poor and may push the US Federal Reserve towards a new round of quantitative easing, dealers said.

The ECB is widely expected to trim eurozone borrowing costs later today by a quarter of a percentage point to a new record low of 0.75%, central bank watchers predicted.

It is hoped the move will build on the progress made by European leaders last week, whose surprise agreement to help the embattled single currency has lifted markets.

The leaders agreed emergency measures, which included using rescue funds to directly recapitalise ailing banks as well as US$150 billion in new stimulus, to help the eurozone whose debt crisis is threatening the world economy.

But with the rate cut now factored in, some analysts argued there could be disappointment without additional measures from the bank, such as the resumption of its bond-buying programme which has lain dormant for 16 weeks.

“We expect the ECB to cut its main interest rate by 25 basis points to 0.75%,” said Berenberg Bank economist Christian Schulz, but warned that such a move alone “would probably disappoint markets”.

European stock markets were little changed on Wednesday as investors awaited the ECB and BoE decisions, with London ending almost unchanged and Frankfurt and Paris edging down.

On currency markets, the euro bought US$1.2524 and 99.85 yen, compared with US$1.2527 and 99.97 in London yesterday afternoon. The dollar was quoted at 79.72 yen against 79.80 yen in London.

On oil markets, New York’s main contract, light sweet crude for delivery in August shed 83 US cents to US$86.83 a barrel while Brent North Sea crude for August delivery slipped 32 US cents to US$99.45.

Gold was at US$1616.85 an ounce at 0715 GMT, compared with US$1,616.50 late yesterday.

In other markets:

  • Taipei fell 0.47%, or 34.81 points, to 7,387.78. Smartphone maker HTC shed 4.9% to Tw$339.5 while Taiwan Semiconductor Manufacturing Co was 0.25% lower at Tw$81.0.
  • Wellington edged up 0.03%, or 1.08 points, to 3,484.20. Air New Zealand rose 0.55% to NZ$0.915, Telecom Corp fell 0.2 percent to NZ$2.49 and Fletcher Building was off 0.64% at NZ$6.22.



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