Shares capped as Fed offers no stimulus clue
2012/07/12TOKYO (Reuters) - Asian shares barely budged on Thursday as the U.S. Federal Reserve appeared to put off taking more aggressive stimulus steps until economic conditions worsen, offering investors few reasons to take risks with second-quarter earnings painting a globally gloomy picture.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> inched down 0.1 percent after slipping to a new low for the month on Wednesday, while Japan's Nikkei average (.N225) eased 0.1 percent after opening up 0.1 percent. (.T)
Some analysts expect disappointing earnings from major U.S. technology companies, while European shares were dented by a weak start to the second quarter reporting season from the region's autos and luxury sectors.
"Investors will be disappointed by the prospects that there may likely be no decisive, growth-stimulating measures on the near horizon while worries of a slowing economy continue to nag," said Park Suk-hyun, an analyst at KTB Securities.
The U.S. Federal Reserve is open to buying more bonds to stimulate the economy, but the recovery might need to weaken for a consensus to build, minutes from the central bank's June 19-20 meeting released on Wednesday showed.
The minutes sent the dollar index (.DXY), measured against a basket of key currencies, to a two-year high on Wednesday, and the euro to a two-year low of $1.2212.
U.S. stocks fell as the minutes suggested no imminent likelihood of a stronger monetary easing, or a third round of outright bond purchases, to bolster the fragile U.S. recovery.
The dollar index was off 0.1 percent early on Thursday and the euro steadied at $1.2239. Early in Asia on Thursday, the euro hit record lows against commodities-linked Australian and New Zealand dollars.
"The current earnings downgrade cycle is constructive for growth, although we will only tilt to risky assets on clear signs production has based," ANZ Bank said in a research note.
"The loss of global growth momentum since Q1 2012 is constructive as it has driven sharply lower energy prices, inflation and rates," it said, adding that this supports the U.S. household sector, limits production cuts and offers a base in the U.S. housing market to give a lift in risk assets.
Investors kept a very close eye on China's second-quarter gross domestic product report due on Friday, which will likely show the slowest growth in at least three years.
Earlier this week, China reported benign inflation and weak imports that pointed to softening domestic demand while uncertainties over the external economic downturn clouded the prospect for exports.
A government report showed on Wednesday the U.S. trade deficit narrowed slightly in May as a rise in exports, including those bound for Europe and China, eased the pain of a slowdown in the broader economy.
Europe, while still skirting around a key issue of creating a structure to cap surging borrowing costs in struggling euro zone member states, made a small step forward on Wednesday when Spain unveiled new austerity measures.
The European Union welcomed the measures, while Spanish shares rose and the country's 10-year bond yields eased further from a critical 7 percent level seen as unsustainable for an economy.
Investors were showing no sign of departing safe assets yet, snapping up government bonds at or near record low yields.
U.S. benchmark 10-year Treasury yields fell as low as 1.45 percent on Wednesday, only one basis point higher than their record low, after a $21 billion sale of new notes drew huge demand.
Germany sold just over 4 billion euros of 10-year bonds on Wednesday, with strong demand allowing it to pay a record low average yield of 1.31 percent.
Brent crude inched up 0.3 percent to $100.48 a barrel and U.S. crude rose 0.1 percent to $85.92.
