* Caution in the air in week packed with manufacturing data,
* Euro on defensive as pressure builds for ECB easing on
* Official China PMI dips to 50.5, but South Korea sees
By Wayne Cole
SYDNEY, Feb 3 Asian shares lost more ground on
Monday as strains in emerging markets show little sign of
abating, while growing pressure for another policy easing in
Europe shoved the euro to 10-week lows.
Japan's Nikkei again led the way with a loss of 1.5
percent, taking it to lows not seen since mid-November.
MSCI's broadest index of Asia-Pacific shares outside Japan
eased 0.3 percent, while Seoul's KOSPI lost 1
percent. U.S. stock futures were faring a little
The week ahead has plenty of event risk with a raft of
global business surveys and jobs data from the United States to
offer a clearer view on how well the global economy is faring,
while the European Central Bank (ECB) might well ease at its
meeting on Thursday.
Investors will be hoping this month is not a repeat of
January, given MSCI's global index posted its
largest monthly decline since May 2012. Emerging markets
lost 6.6 percent for their worst January since 2009.
Sentiment was not helped by more downbeat reports from China
where the official Purchasing Managers' Index (PMI) dipped to
50.5 in January from December's 51, in line with market
expectations. A separate survey of the service sector also
showed a moderation in growth.
Analysts cautioned that the ongoing Lunar New Year holiday,
which began on Jan. 31, probably dragged on output as
manufacturers shut up shop for China's biggest annual holiday.
There was better news from South Korea where the PMI edged
up to its highest in eight months, a further sign of growth
after surprisingly upbeat industrial output figures last week.
"Manufacturing conditions continue to improve in Korea,
boosted by stronger new orders on the external front," said HSBC
economist Ronald Man. "This suggests that Korea is on track for
a gradual export-led recovery."
Europe and the United States release their versions of the
PMI later Monday and expectations are they will show continued
growth, which could help reassure skittish investors.
SECOND GUESSING THE ECB
However, while the euro zone is slowly recovering inflation
is getting dangerously low, piling pressure on the ECB to take
further policy action.
Inflation in the region ran at just 0.7 percent for the year
to January, a level that has prompted the central bank to ease
in the past.
"We think the low inflation readings in the euro area, along
with fears of a further decline into deflationary territory,
will lead the ECB to cut the main refinancing rate by 15 basis
points, and to cut the deposit rate by 10 basis points," said
Dean Maki, an economist at Barclays.
"Advanced economy growth is benefiting from the very
accommodative monetary policy that has been fostered by low
This relative improvement in growth is one reason investors
have been switching funds out of emerging markets and into the
The prospect of a further easing in Europe has also weighed
on the single currency, pinning it near 10-week lows at $1.3485
on Monday following a break of major support at $1.3506.
The euro has likewise fallen sharply on the yen in the last
few sessions and was up just a shade on Monday at 138.01
, having been at its lowest since November.
The dollar edged up slightly on the yen to 102.36 yen
, having found solid support above recent lows around
The flight from risk has boosted major bond markets, with
rising prices driving yields on the benchmark 10-year U.S.
Treasury note down to 2.66 percent and again near
levels not seen since mid-November.
In commodities, gold failed to benefit as much and actually
lost ground over the past week to stand at $1,244.19 an ounce
Brent oil was off 2 cents at $106.38 a barrel,
having suffered its biggest monthly loss in four months. U.S.
crude eased 21 cents to $97.28.