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Asian shares slipped on Monday and the dollar stayed near a four-month low against a basket of major currencies after soft data raised doubts over whether the US economy has been growing despite US share prices standing at historic highs.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4 per cent, although Japan’s Nikkei share average edged up just 0.4 per cent thanks to some companies’ move to boost shareholder returns.
US industrial production, consumer confidence
US industrial production unexpectedly fell for a fifth straight month in April, while consumer confidence dropped to a seven-month low in early May, data had showed on Friday, pushing down the dollar and US bond yields.
Coming on the heels of weak retail sales and producer inflation data, the reports stoked concerns that the US economy is hardly gaining momentum after disappointing 0.2 per cent annualised growth in January-March.
Questions have arisen over whether the economy grew at all in the last quarter.
“US GDP will likely be revised down in the next update to show a contraction. We estimate the US economy shrank 0.9 per cent,’’ said Shuji Shirota, head of macro economics strategy group at HSBC in Tokyo.
US growth concerns
While many investors stick to the view that the US economy will accelerate later this year, signs of weakness are a source of concerns given many investors counted on US growth to lead the global economy as China slows down and many other major economies are in the doldrums.
“Share prices in Europe, China, and Japan have risen already so far this year, so the market needs confirmation that the economy and corporate earnings will be improving,’’ said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.
Wall Street at record high
Wall Street shares also stood near record highs, with S&P 500 closing at record high for a straight session on Friday at 2,122.73.
US shares were helped by the weak data to some extent, as it reinforced expectations the Federal Reserve will wait for longer before raising interest rates. US interest rate futures priced in a rate hike towards the end of 2015.
US Treasury yields
The 10-year US Treasury yields fell almost 10 basis points to 2.14 per cent on Friday compared to a six-month high of 2.366 per cent set on Tuesday. It last stood at 2.152 per cent.
Dollar vs other currencies
The dollar index stood at 93.435, rising slight in early Asian trade on Monday, but was still near the four-month low of 93.133 hit on Thursday.
The euro traded at $1.1428, near a three-month high of $1.1468 hit on Friday.
Rises in euro zone debt yields, which make euro zone bonds more attractive, have supported the common currency.
The yen was little changed at 119.27 to the dollar, while sterling was off Thursday’s six-month high of $1.5815, changing hands at $1.5733.
The New Zealand dollar fell 0.4 per cent to $0.7443 after the government had announced on Sunday a new capital gains tax on residential property investments to cool the soaring prices in Auckland. The move has raised speculation that the central bank could cut interest rates in coming months.
Oil prices held firm on supply concerns in West Asia following fighting in Iraq and Yemen, with Brent futures standing at $66.84 per barrel.
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