Asian markets rise as cautious investors return
Asian markets react to modest rise in US stock futures. But trading expected to be seasonally thin in Asian markets.
A man is reflected on an electronic board displaying foreign exchange rates and market indices outside a brokerage in Tokyo Aug. 11, 2011. On Aug. 15, 2011, the Nikkei average and other Asian markets rebounded after US stock futures showed a positive tone. Separately, domestic data showed Japan's economy didn't shrink by as much as expected.
Yuriko Nakao/Reuters
HONG KONG/SINGAPORE
Asian markets bounced on Monday and safe-haven assets like gold and the Swiss franc fell as market players cautiously returned to pick up bargains after last's week wild ride, though concerns over the weak global economic outlook may keep gains in check.
A modest 0.4 percent rise in U.S. stock futures also encouraged some bargain hunting in Asian markets, but investors may be more likely to sell into rallies than buy into any dips ahead of fresh readings on the U.S. and euro zone economies this week.
Japan's Nikkei rose 1.5 percent after main Wall Street indices advanced on Friday but without the wild intra-day swings that marked the first few days of trading last week after the U.S. credit rating was downgraded by Standard and Poor's.
Japanese shares were also boosted by data showing Japan's economy shrank less than expected in April-June following a devastating earthquake and tsunami in March.
Asian stocks outside of Japan rose by a similar margin, after tumbling nearly 4 percent last week, with key indexes in Hong Kong and Australia up nearly 2 percent.
Frances Cheung, senior strategist at Credit Agricole in Hong Kong, said a meeting between the leaders of France and Germany on Tuesday would be crucial to determining whether any longer term solution to the euro zone's sovereign debt crisis is in the works.
"There is still a huge focus on money markets ... and looking at them shows not everything is solved," she said.
German Chancellor Angela Merkel and French President Nicolas Sarkozy are due to meet in Paris to hammer out a solution to the sovereign debt crisis which has shown signs of ensnaring the big euro zone economies like Italy and Spain and heightened strains in money markets to levels not seen during the 2008 crisis.
In recent days, France itself has come under attack from the markets.
While dollar funding costs evident from cross currency basis swap rates in dollar/yen and dollar/euros have cooled from last week's peaks, they are still at elevated levels.
On a valuation basis, the MSCI index of Asia stocks outside Japan trades at 11.5 times forward 12-month earnings, according to Thomson Reuters I/B/E/S, above the 7.9 times seen during the depths of the 2008 financial crisis.
That suggests investors may still not be in a hurry to buy despite the 13 percent decline over the last two weeks.
