TOKYO — Asian shares fell on Thursday in choppy trade as positive Chinese manufacturing data were eclipsed by North Korea threatening a nuclear test and on below-view results from Apple.
"Markets see a global economic recovery trend but there is no consensus on the strength of growth, capping many markets. Equities have been clearly benefiting from accommodative monetary conditions," said Koichiro Kamei, MD at financial research firm Market Strategy Institute.
China’s HSBC flash purchasing managers’ index (PMI) rose to 51.9 in January to a two-year high, signalling a rebound in manufacturing activity and confirming a recovery in the world’s second-largest economy was on track.
However, while the data briefly spurred markets higher, geopolitical uncertainty on the Korean peninsula and Apple’s disappointing earnings dented overall demand.
The MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4% after rising as much as 0.2% earlier. The index briefly touched a fresh 17-and-a-half-month high the day before, exposing many bourses to profit-taking pressures ahead of the regional earnings season set to start in earnest later this month.
The pan-Asia index’s technology sector and the region’s Apple suppliers fell after the world’s largest technology company missed revenue forecast for the third straight quarter after iPhone sales undershot expectations, sending its shares down more than 10% in after-hours trading.
A sharp drop in Apple’s component suppliers such as South Korea’s LG Display and Taiwan’s Hon Hai dragged South Korean shares down 0.9% and Taiwanese stocks down 0.6%.
Chinese shares surrendered strong early gains, weighing on Hong Kong, after North Korea said it would carry out a nuclear test that would target the US, dramatically stepping up its threats against a country it called its "sworn enemy".
Bucking the trend, Australian shares rose 0.5% to a fresh 21-month high after reversing morning losses following the data from China, Australia’s top export market.
The data also helped push Japan’s Nikkei stock average up 1.3%, as companies with high exposure to the Chinese economy notched up gains. Most Japanese suppliers to Apple also recouped earlier losses.
"The underlying tone is still bullish, so even bad news about Apple or whatever doesn’t hit stocks too hard," said Masato Futoi, head of cash equity trading at Tokai Tokyo Securities, adding that three days of losses spurred dip-buying.
European markets were seen easing, with financial spread-betters predicting London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX would open down as much as 0.1%. US stock futures were down 0.3%, pointing to a softer Wall Street start.
Yen buying halted
The two-day yen buying spree came to a pause. The currency’s recent rebound came after the Bank of Japan’s latest policy easing steps on Tuesday failed to provide immediate stimulus as expected by some investors. The bank pledged to achieve a 2% inflation target and promised to start open-ended asset buying from 2014.
The dollar rose 0.8% to ¥89,33 while the euro also advanced 0.8% to ¥118,93. The yen is still down 12% from its mid-November levels, when markets began pricing in strong monetary accommodation from the Bank of Japan.
Many market players believe the yen’s weakness will persist due to widespread expectations the bank will continue pursuing aggressive monetary easing policies to beat the country’s stubborn deflation.
"I think we will struggle to break ¥91, but I will still keep looking for us to trade above ¥90 in the short-term," said Jesper Bargmann, Asia head of G11 spot FX for RBS in Singapore, referring to the outlook for the dollar against the yen over the next week or so.
Data on Thursday confirming a deteriorating Japanese trade balance also encouraged yen selling, traders said. Japan logged a record annual trade deficit in 2012.
Investors were also reminded of the challenges facing the global economy on Wednesday when the International Monetary Fund predicted that an unexpectedly stubborn eurozone recession and weakness in Japan will hurt world growth. A Reuters poll also showed Asian economies would see weaker growth this year despite expected policy easing by central banks.
US crude rose 0.4% at $95.57 a barrel while Brent steadied at $112.78.
London copper was down 0.3% at $8.076 a tonne and spot gold fell 0.4% to $1,678.81/oz, slipping from a recent one-month high.