Thursday, May 5, 2011

Asia Mixed Amid Weak Commodities, Pre-ECB Meeting

Thursday, May 5, 2011

Renren shares got off to a strong start despite the social-networking firm's last-minute stumbles. Meanwhile, China forms a new Internet agency, and it's unclear what it means for Web companies seeking growth. WSJ's Jake Lee and Andrew LaVallee discuss.

SINGAPORE—Asian stock markets were mixed on Thursday, with retailers' stocks in Sydney weighed by an unexpected fall in retail sales for March, while many investors were cautious amid the decline in commodities and a general reduction in risk appetite.

Australia's S&P/ASX 200 rose 0.2%, Hong Kong's Hang Seng Index slipped 0.1%, China's Shanghai Composite fell 0.2% and Philippine shares fell 1.2%. Markets in Japan, South Korea and Thailand were shut for public holidays.

Dow Jones Industrial Average futures were 45 points higher in screen trade.

A sharp selloff in silver prices also spooked commodity investors, heightened risk aversion and sent commodity-linked currencies like the Australian and New Zealand dollars lower.

"Commodities have been the story over the past couple sessions...there's certainly no one just quite ready to stand in front of this (commodities selloff)," said Michael Turner, a Sydney-based strategist with RBC Capital Markets. Investors were also cautious ahead of the European Central Bank policy meeting later in the global day and Friday's U.S. nonfarm payrolls data.

Spot silver, which has slumped around 19% this week, was recently at $39.04 a troy ounce, down 35 cents from Wednesday's New York settlement. Spot gold edged higher after falling sharply in the past few days, and was at $1,518.30 a troy ounce, up 80 cents.

The benchmark S&P/ASX 200 index recovered to rise to 4747.60 after earlier falling to a six-week low of 4716.9. Some disappointing earnings and economic data tempered sentiment already weakened by falls in commodity and base metal prices.

Data earlier on Thursday showed Australia's March retail sales fell 0.5% from February, compared with an expected 0.5% rise, while first quarter retail sales were flat on quarter, compared with an expected 0.7% gain.

The outcome dampened interest rate hike expectations, and further drove the Australian dollar down to a one week low of US$1.0697. It was recently fetching US$1.0738.

Some retailers were hurt by the data, with Myer falling 1.4% and Harvey Norman declining 0.8%.

News Corp., which owns The Wall Street Journal, fell 3.4% after its fiscal third-quarter earnings declined by almost 24% and failed to meet market expectations.

On the plus side, National Australia Bank shares rose 2.4% after its fiscal first-half profit topped expectations.

ANZ Bank lost 0.5% and Westpac gave up 1.2% after broker downgrades on the stock following this week's first-half results.

"We have a pretty meaningful pullback and there is some technical support near 4700," said IG Markets strategist Ben Potter. "But it's all about commodities weakness...so obviously the Australian market is facing some major headwinds relative to the U.S. market."

The lower base metal prices and commodities weighed on markets in China and Hong Kong. Metal companies in China were down, with Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech off 1.1% and Jiangxi Copper down 2.5%. In Hong Kong, commodity price weakness hurt Cnooc and Chalco, down 2.0% and 1.3%, respectively.

"The Hong Kong market remains in a consolidation mode, but it's not alone, as we can see the China markets and the U.S. markets are having similar trading patterns," said Prudential Brokerage's associate director Alvin Cheung.

In Manila, shares of San Miguel fell sharply as it resumed trading after a three-week suspension to make way for its $900 million sale of shares and convertible bonds.

It slumped 30% from its 153 Philippine pesos ($3.58) closing price on April 12, the last day it traded before the suspension.

Among other markets, New Zealand's NZX-50 was 0.2% higher, Singapore's Straits Times Index fell 0.1%, Malaysia's KLCI fell 0.2%, Taiwan's Taiex tacked on 0.8%, Indonesian shares fell 0.3% and India's Sensex rose 0.2%.

Stocks fell today, pressured by disappointing economic data, weaker commodity prices and lackluster earnings reports. Kristina Peterson has details. Plus, Chinese social network Renren sees its shares soar in their U.S. debut.

In foreign exchange markets, the Japanese yen and the Swiss franc were steady against the U.S. dollar amid heightened risk aversion. The euro, however, held its own as traders awaited the ECB's policy meeting later in the global day.

"From a currency perspective, there will be two principal points of interest. The first will be whether ECB President Jean-Claude Trichet signals a June move or a July move," Credit Agricole said in a note to clients. "We suspect the latter, which suggests no exaggerated upside for the euro. But aside from these code-words, the language is likely to remain overtly hawkish, which means very little reason to sell the euro," it said.

The single currency was fetching $1.4843 against the greenback, from $1.4829 late in New York on Wednesday, and ¥119.50 against the yen, from ¥119.47. The dollar was at ¥80.50, from ¥80.61 and at 0.8602 Swiss francs against the Swiss franc, compared with 0.8616 Swiss francs.

June Nymex crude oil futures were down 44 cents at $108.80 per barrel on Globex.

Write to Shri Navaratnam at shri.navaratnam@dowjones.com



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