Asia shares win reprieve but Greece, China concerns limit gains
TOKYO – Asian stocks won a reprieve on Tuesday after sharp falls the previous day but investors remained on edge amid uncertainty over Greece’s position in the euro and volatility in mainland Chinese equity markets.
Chinese shares dropped almost two percent in early trading, reversing much of gains made on Monday following unprecedented steps to stabilise a plummeting market.
Japan’s Nikkei rose 1.2 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan, which fell to six-month low on Monday, was up 0.3 percent.
European and U.S. stocks fell on Monday after Greeks voted overwhelmingly to reject more austerity. However, despite the huge uncertainty stemming from the Greek saga, most markets were relatively becalmed following the initial selloffs.
The euro also rebounded from Monday’s one-week low to fetch $1.1044.
For now investors are holding out hope that Greece will manage to strike a deal with its creditors and prevent an exit from the euro zone.
“Greece is in difficult condition. Although there is volatility in the short term and discussion will be rough, I still expect a solution to be found to avoid a very nasty situation in the end,” said Alain Bokobza, Paris-based head of global asset allocation at Societe Generale, who is visiting Tokyo.
In a sign that Athens is keen to seek a new deal, Greece’s combative finance minister, Yanis Varoufakis, resigned on Monday, apparently under pressure from other euro zone finance ministers who did not want him as a negotiating partner.
Greek Prime Minister Alexis Tsipras told German Chancellor Angela Merkel on Monday that Greece would bring a proposal for a deal to Tuesday’s emergency euro zone summit, a Greek official said.
Still, it was unclear how much it would differ from other proposals that were rejected in the past or if creditors – especially Germany – is willing to concede some debt relief to Athens.
Asian assets were also increasingly burdened by rising concerns over massive losses in Chinese stock markets over the past month or so.
Trading remained highly volatile even after weekend emergency measures from Beijing, under which brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.
“Prior to the selloff the Chinese market looked bubbly, kept rising even as the economy is slowing. It will take some time for the market to calm down,” said Shuji Shirota, head of macroeconomics strategy group at HSBC in Tokyo.
“Judging from Japanese experience it is not easy to support share prices just by price keeping operation,” he said, referring to Japanese attempts in the 1990s to shore up the stock market by using public funds to buy shares.
Fears of instability in the Chinese economy dented many types of assets that are thought to be leveraged to demand from China.
In the currency market, the Australian dollar fell to a six-year low of $0.7452 on Monday and last stood at $0.7480.
London Copper was softer at $5,583 a tonne, not far from a five-month low of $5,520 touched on Monday, when Shanghai copper posted its steepest daily drop in five months.
Oil prices also steadied after having suffered its biggest selloff in five months on Monday.
On top of the Greek and China worries, oil prices were pressure by expectations that nuclear-compromise talks between Iran and global powers could ease sanctions against Teheran and open up oil exports to an already over-supplied market.
U.S. crude fell 7.7 percent on Monday, hitting a three-month low of $52.41 a barrel and last stood at $53.03, up 1.0 percent from late U.S. levels.
Brent shed 6.3 percent on Monday and last quoted at $57.07, up 1.3 percent on day. – Reuters