ASIAN MARKETS: Bernanke hints leave investors bemused, markets becalmed
Asian shares eased on Monday after US Federal Reserve Chairman Ben Bernanke kept the door open for further stimulus if needed, while stopping short of giving any clear direction about an imminent move, prompting investors to look for clues in upcoming data.
“The message came through that conventional measures would probably persist, with measurable results, and that anybody waiting for unconventional wild methods would have to keep waiting,” said Richard Hastings, macro strategist at Global Hunter Securities. “There is little need for anything other than bond purchases right now.”
Investors will face data from Asia on Monday to gauge the strength of growth in the region, including HSBC’s final report on China’s manufacturing activity due at 0230 GMT, which reflects smaller and privately-owned producers.
China’s official factory purchasing managers’ index on Saturday showed a drop below 50 for the first time since November 2011, in the latest signal that the world’s second-biggest economy is struggling against global headwinds and the case for further stimulus is strengthening.
MSCI’s broadest index of Asia-Pacific shares outside Japan inched down 0.2 per cent, after hitting a four-week low on Friday and ending August down 0.8 per cent, swinging into the red from July’s 3.5 per cent gain.
Japan’s Nikkei stock average opened down 0.04 per cent after sliding to its lowest level in nearly four weeks on Friday.
Bernanke, speaking at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming, on Friday expressed “grave concern” for the stagnating US job market and said the Fed was prepared to take further steps to strengthen the economy if necessary.
Bernanke said the Fed had to weigh the costs and the benefits of further stimulus, but he downplayed potential risks from the unconventional policies, arguing the Fed’s asset purchases, known as quantitative easing, had been quite effective at boosting growth and fostering job creation.
His comments heighten market focus on US data due this week including the ISM manufacturing on Tuesday and the monthly jobs report on Sept. 7 ahead of the Fed’s Sept. 12-13 meeting.
“It is inevitable we will see another round of economic stimulus in September,” said Jeff Sica, chief investment officer of Sica Wealth Management.
But he cautioned that markets may decline after the Fed’s meeting given high expectations for a bold step already reflected in the recent performance of the Standard & Poor’s 500 index, which hit a four-year high last month.
“The Fed cannot use a massive quantitative easing program since food and energy prices will ultimately accelerate creating massive inflation,” he said.
Bernanke’s comments boosted global stocks and sent US Treasuries yields to their lowest levels in three weeks, while lifting the euro to an eight-week high against the dollar of $1.2638 on Friday.
The dollar eased 0.1 per cent against the yen at 78.30 yen on Monday, after slipping to a three-week low of 78.187 on Friday on Bernanke’s comments.
The dollar ended August marginally up against the yen, defying the jinx that has usually seen the yen firm against the dollar in the month.
Data on Friday showed currency speculators turned negative on the dollar in the latest week for the first in nearly a year.
The euro was off Friday’s highs but nudged up 0.1 per cent to $1.2576 on Monday. Even as the US dollar was weighed down by the prospect of more monetary easing, concerns about slowing Chinese economy sent the Australian to its lowest since July 25 of $1.0271 early on Monday.
Weakness in Chinese demand took a toll on South Korean exports, which fell 6.2 per cent in August from a year earlier for the sixth month of annual decline this year. Sales to the top market China fell 5.6 per cent for the first 20 days of August over a year earlier and those to the European Union dropped 9.3 per cent.
After Bernanke, the European Central Bank takes the spotlight with its policy meeting on Thursday, where markets have been expecting the bank to provide some details to its bond-buying scheme aimed at driving down borrowing costs of highly-indebted euro zone members such as Spain and Italy.
Spain will consider seeking extra aid from Europe on top of a 100 billion rescue of its financial sector, but does not see any need for new conditions, Prime Minister Mariano Rajoy told European newspapers on Sunday.
(Editng by Eric Meijer)