GLOBAL MARKETS-Nikkei soars on yen weakness, Asian shares slip

Tue Jan 15, 2013 1:42am EST

* MSCI Asia ex-Japan falls as Korea hurt by falling Apple suppliers

* Nikkei ends at 32-month highs after yen hits highs the day before

* Japan warns of excessive yen weakness, easing yen selling

* Platinum hits three-month high, eyes parity with gold

* European shares likely inch lower

By Chikako Mogi

TOKYO, Jan 15 (Reuters) - Japanese shares surged to 32-month highs on Tuesday on the back of the yen's slide the previous day as expectations grew that strong political pressure will prompt the Bank of Japan to deliver bold monetary easing measures.

Other Asian stock markets struggled, with the MSCI's broadest index of Asia-Pacific shares outside Japan falling 0.4 percent, led by a 1.5 percent decline in its technology sector

The pan-Asian index was dragged down by a 1.2 percent tumble in South Korean shares, hit by losses in Apple Inc's suppliers after media reports said the iPhone maker had slashed orders of screens and other components on weaker-than-expected demand. Apple suppliers in Taiwan also pulled Taipei stocks down 0.8 percent, their first loss in five sessions.

European markets are likely to trade cautiously, with financial spread-betters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open down as much as 0.2 percent. A 0.2 percent fall in U.S. stock futures hinted at a soft opening on Wall Street.

"Investors (in the Seoul market) are taking profits on the technology sector, which rallied for the past couple of months, while snapping up auto shares which have been lacklustre," said Kim Soo-young, an analyst at KB Investment & Securities in Seoul.

Tokyo shares were the highlight of the session, with the benchmark Nikkei stock average climbing as much as 1.4 percent to its highest level since late April 2010 as the yen remained on a weakening track, helping to improve earnings prospects for exporters. The Nikkei ended up 0.7 percent.

Japanese stocks got a boost "because the yen weakened further against dollar over the weekend," said Naoki Fujiwara, a fund manager at Shinkin Asset Management in Tokyo. "We expect the current trend to continue until the Nikkei reaches 11,000 and the yen hits 90. Once it gets there, Tokyo stocks are likely to move in a boxed range."

Yen-selling activity eased on Tuesday, however, when Japanese Economics Minister Akira Amari said excessive yen weakness could have a negative impact on people's livelihoods through a rise in import prices.

The dollar took a breather, pulling back as much as 1 percent to 88.62 yen, having hit its peak since June 2010 of 89.67 yen on Monday. The euro shed nearly 1 percent to 118.58 yen, having hit its highest since May 2011 of 120.13 on Monday.

The yen's recent weakness also lifted gold priced in yen, with Tokyo's benchmark gold futures contract hitting a record high for a second straight session.

Many still believe the weak yen trend has more momentum, supported by benchmark U.S. Treasury yields inching higher since late last year.

In a research report, Societe Generale noted that U.S. exports in 2012 have overwhelmed others in the Group of Five -- the United States, Britain, Germany, France and Japan, and concluded the U.S. was "winning the currency war" while Japan was losing "in a really big way".

"Buying USD/JPY is the obvious conclusion," it said.

HOPES AND RISKS

Among other markets, Indian shares extended gains to a two-year high on hopes the central bank will cut interest rates later this month.

Hong Kong shares fell 0.3 percent after hitting a 19-month high earlier in the day. But the Shanghai Composite added 0.7 percent to a six-month high, led by financial shares, as investor sentiment was buoyed by last week's data showing stronger-than-expected trade growth and healthy credit creation.

"Money that was sitting on the sidelines has now been persuaded that the rally is sustainable," said Zhang Weiguang, equity analyst at Shanghai Securities.

Stabilising U.S. and Chinese economic conditions as well as supply concerns in South Africa have underpinned platinum prices, putting them on the brink of reaching parity with gold.

Spot platinum hit a three-month high of $1,660.75 an ounce on Tuesday for a sixth day of gains, while spot gold inched up 0.2 percent to $1,670.33.

As the world's No. 2 economy and top consumer of most commodities, China holds the key to sentiment. Ian Bremmer, president of political risk firm Eurasia Group, cautioned that political instability in emerging markets, led by China, will be one of the biggest risks for markets in 2013.

U.S. fiscal problems are among some of the other factors investors will need to consider.

Federal Reserve Chairman Ben Bernanke on Monday urged U.S. lawmakers to lift the country's borrowing limit to avoid a potentially disastrous debt default.

Also on Monday, U.S. President Barack Obama refused to trade cuts in government spending in exchange for raising the borrowing limit. If the limit is not raised, the United States could default on its debt.

U.S. crude fell 0.4 percent to $93.74 a barrel and Brent eased 0.3 percent to $111.51.

A weak equities market weighed on Asian credit markets, widening the spread on the iTraxx Asia ex-Japan investment-grade index by 2 basis points.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.