Asian markets managed a muted cheer overnight, as China reported economic growth that was a fraction ahead of forecasts, a relief to many but still not enough to dispel a general air of caution. A majority of the share markets in the region stayed in the red, with Tokyo off 0.6 per cent, Sydney 0.2 per cent and Shanghai 0.8 per cent.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 per cent. European shares were expected to open steady to modestly weaker, with Germany's DAX seen down as much as 0.3 per cent, according to financial bookmakers.
Deutsche Bank started the week on a sour note by reporting a surprise pre-tax loss of €1.15 billion euros for the fourth quarter of 2013 due to heavy costs for litigation, restructuring and balance sheet reduction. The bank was originally scheduled to report its results on January 29th, but the Wall Street Journal on Friday reported that a profit warning was possible. The unexpected loss is likely to compound the problems that have dogged the bank over the past year, especially a lengthening list of lawsuits and regulatory matters, and redouble pressure on co-chief executives Anshu Jain and Juergen Fitschen to prove their turnaround plan is on track.
Liquidity was lacking with US markets closed today for a holiday. Neither was there much of a lead from Wall Street, where the Dow ended last week with a slim gain of 0.1 per cent, while the S&P 500 lost 0.2 per cent for the week.
China’s annual economic growth slowed a tick to 7.7 per cent last quarter, which was just ahead of market forecasts for 7.6 per cent and at least countered fears that monetary tightening could have caused a sharper pullback.
"The economy may be a little more robust than people thought coming into 2014," said Tim Condon, an economist at ING Group in Singapore. "I had thought the monetary tightening in 2013 would pose a downside risk. The numbers reduce that downside risk." The other data out were much in line with forecasts, with retail sales growing 13.6 per cent in December from a year earlier, while industrial output rose 9.7 per cent. That resilience was considered a positive for Australia given China is its single biggest export market, and helped the Australian dollar clamber off a three-year trough of $0.8756 to reach $0.8782. Yet the Australian currency remains out of favour having shed 2.4 per cent last week due to disappointing domestic data and demand for US dollars and yen. In contrast, the US dollar gained 0.9 per cent last week against a basket of major currencies on expectations the Federal Reserve will stick with plans to scale back its bond buying at a policy meeting later this month. The yen had been in demand on Monday as general mood of risk aversion led speculators to cut back on short positions, which has been a very popular trade for months now. The euro was particularly affected, dropping to a six-week low at one stage before steadying at 140.92 yen. The dollar eased to 104.11 yen from an early 104.32. The Bank of Japan holds its policy meeting on Tuesday and Wednesday and is expected to maintain its massive asset buying programme.
Reuters
