Asian shares dip on ECB hopes
Asian shares slid to near six-week lows and the euro fell today, as investors turned edgy ahead of a pivotal European Central Bank meeting tomorrow and US payroll data on Friday.
Investors braced for the possibility that the ECB will act less boldly than they earlier hoped. Still, if the ECB disappoints and the US data is bad, that should boost chances government need to take more action to counter global woes.
European equities were seen edging higher, with financial spreadbetters calling London's Ftse 100, Paris's Cac-40 and Frankfurt's Dax to open as much as 0.3 per cent higher.
MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 1.2 per cent to a five-week low, with its materials sector by far the worst performer with a 2 per cent slump, and dragging resource-rich Australian shares down 0.7 per cent to a one-month low.
The pan-Asian index has lost all the gains built since comments in early August by ECB president Mario Draghi that bolstered hopes for decisive action to deal with the three-year-long euro zone debt crisis.
Japan's Nikkei stock average slid 1.0 per cent to a four-week low.
"It's a correction as we get nearer to Thursday," said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong. "Hopes for more policy support were sustained during the summer because there were no major deadlines, but now we do have deadlines, and the risk is, there could be some disappointment."
Ms Cheung said she expects investors to view bad data as pointing to more policy measures aimed at supporting markets.
The euro slipped 0.2 per cent but traded within recent ranges at $1.2540, while the dollar inched up 0.1 per cent against the yen to 78.45 yen.
"Some investors are wary that the euro's rally ahead of the ECB meeting will turn out to be, 'buy the rumour, sell the fact,' with so many key details of the debt-buying plan still unclear, such as volume," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.
Markets expect the ECB to outline its bond-buying programme aimed at containing the yields of highly indebted countries such as Spain to reduce their financing cost.
Some expect the ECB to offer details such as identifying maturities of bonds it intends to buy, most likely two to three years.
Market expectations for additional monetary stimulus from the U.S. Federal Reserve gained momentum after chairman Ben Bernanke last Friday said the Fed was ready to act if needed.