Asian shares pare gains after weak China trade data

By Dominic Lau

TOKYO | Tue Jul 9, 2013 11:21pm EDT

TOKYO (Reuters) - Asian shares cut gains on Wednesday after data showed Chinese exports fell for the first time since January 2012, adding to signs that its economy continues to lose steam, while the dollar hovered at three-year highs versus a basket of currencies.

China's exports fell 3.1 percent in June from a year earlier, while imports dropped 0.7 percent, severely missing market expectations and reinforcing signs of a second-quarter economic slowdown in the world's second-largest economy.

The downbeat trade data follow the government's crackdown on the use of fake export documents to close a loophole for short-term money inflows that had exaggerated China's export performance.

"The surprisingly weak June exports show China's economy is facing increasing downward pressure on lackluster external demand. Exports are facing challenges in the second half of this year," said Li Huiyong, economist at Shenyin & Wanguo Securities in Shanghai.

"The appreciation of U.S. dollar and the Chinese government's recent crackdown on speculative trade activities also put pressure on exports."

MSCI Asia-Pacific ex-Japan index .MIAPJ0000PUS was up 0.5 percent after gaining as much as 1.2 percent to a one-week high before the Chinese data. Earlier, Asian markets were helped by Wall Street's gains on optimism for U.S. company earnings.

China's CSI300 .CSI300 index edged up 0.3 percent after their recent battering as Beijing tried to bring risky lending under control.

Assets in Australia, seen as a proxy of China's growth, were hit, with the Australian dollar falling to a session low of $0.9125 and the country's S&P/ASX 200 index .AXJO paring gains.

Tokyo's Nikkei share average .N225 added 0.1 percent by midday break in relatively light trade.

Copper prices also reversed gear after the trade data from China, a top consumer of raw materials. They fell 0.4 percent to just above $6,700 a metric ton (1.1023 tons), while gold dipped 0.3 percent after rising 1.1 percent on Tuesday.

Brent crude prices were steady at below $108 a barrel after rising 0.6 percent in the previous session on concerns that violence in Egypt could ignite conflict in the Middle East. Brent prices have rebounded 11 percent from a more than nine-month low touched on April 18.

UPBEAT DOLLAR

The euro steadied after sliding to a three-month low against the dollar after ratings agency Standard & Poor's cut Italy's debt rating by one notch to BBB, the second lowest of the investment grade status, and left its outlook on negative, citing concerns about prospects for the Italian economy.

The downgrade, which moved in line with rival Moody's, came a day before Italy was due to sell 9.5 billion euros of Treasury bills and two days before a planned sale of up to 6.5 billion euros of medium- and long-term bonds.

Also weighing on the common currency were comments by European Central Bank policymaker Joerg Asmussen, who said the central bank's guidance on interest rates staying at record lows extends beyond 12 months.

The ECB later issued a statement saying Asmussen had not intended to give any guidance on the exact length of time for which it expects to keep rates at record lows.

The euro was steady at $1.2775 after falling to a three-month trough of $1.2755 on Tuesday.

"Dollar buying will continue. With rising Treasury yields, there is no incentive to sell the dollar, particularly against the euro," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

However, Murata added, "any evidence of a slowdown in China will prompt some people to buy back the yen."

The dollar .DXY hovered near a three-year high against a basket of major currencies, with more investors betting on further gains as the Federal Reserve prepares to scale back its $85 billion a month stimulus program. The index was last up 0.1 percent.

The greenback was steady at 101.12 yen, while sterling stabilized at $1.4864 after sliding to a three-year low of $1.4814 in the previous session on weak factory output and trade data, seen as raising the risk of the Bank of England easing monetary policy in the coming months.

The U.S. central bank releases minutes from its June policy meeting later in the day and Fed Chairman Ben Bernanke is also due to speak on Wednesday.

(Additional reporting by China Economics Team, Lisa Twaronite in Tokyo and Ian Chua in Sydney; Editing by Eric Meijer and Richard Borsuk)

Source: http://www.reuters.com/article/2013/07/10/us-markets-global-idUSBRE88901C20130710?feedType=RSS&feedName=businessNews

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