* Spreadbetters see European shares skidding at open
* China flash PMI finds manufacturing weaker than expected
* Minutes show Fed still intent on stimulus withdrawal
* Yen pushes higher vs. dollar, euro; dollar index heads for
By Lisa Twaronite
TOKYO, Feb 20 Asian stocks tumbled on Thursday
and the yen firmed as a survey painted a grim picture of China's
manufacturing sector, heightening uncertainty about the outlook
for the region's economic powerhouse.
The mood was likely to cast a shadow over European trading,
with financial spreadbetters predicting Britain's FTSE 100
to open 44 to 51 points lower, or down as much as 0.8
percent; Germany's DAX to open 100 to 110 points lower,
or down as much as 1.1 percent; and France's CAC 40 to
open 34 to 36 points lower, or down as much as 0.8 percent.
With investors awaiting the latest manufacturing and
services flash PMI reports for Germany and France, "We are
calling the major bourses weaker," IG market strategist Stan
Shamu said in a note to clients.
"Most of the PMI readings are expected to show some signs of
improvement, which leaves the single currency vulnerable to any
negative surprises. The euro has actually held up fairly well
despite the subdued risk tone," Shamu said.
Asian equities were already on the back foot, tracking U.S.
losses after minutes of the Federal Reserve's latest policy
meeting and a chorus of U.S. central bank officials showed it
remained on track to taper its stimulus.
MSCI's broadest index of Asia-Pacific shares outside Japan
extended its drop after the China survey, losing
1 percent. Japan's Nikkei stock average ended down 2.2
percent, marking its biggest daily percentage drop in two weeks.
The preliminary China Purchasing Managers' Index (PMI) from
HSBC/Markit for February fell to a seven-month low of 48.3 in
February from January's final reading of 49.5, as employment
fell at the fastest pace in five years.
While the Lunar New Year holiday likely affected the
results, and recent rises in China's exports and bank lending
assuaged some anxieties, the latest report followed a series of
PMIs in January that showed growth in China's manufacturing and
services sectors at multi-month or multi-year lows. Sustained
weakness would put the onus on Chinese policymakers to act.
"The upcoming annual parliamentary meetings in early March
will take on bigger importance now," said Linus Yip, a Hong
Kong-based strategist at First Shanghai Securities.
"You have to expect Beijing to act if the economy slows down
more from here, because they cannot proceed with their reform
agenda without maintaining a certain level of growth."
Rekindled China worries, combined with concern about the
impact of Fed stimulus withdrawal, pressured emerging Asian
currencies, with the South Korean won leading losses.
Sentiment in Tokyo was further darkened by Japan posting a
record trade deficit in January, as export growth slowed and
imports outpaced shipments as a weak yen boosted import costs.
On Wall Street on Wednesday, the Dow Jones industrial
average, the Standard & Poor's 500 Index and the
Nasdaq Composite Index all skidded, following release of
the Fed minutes.
The minutes showed members on the Fed's policy setting
committee emphasized their commitment to trimming the central
bank's asset-purchase programme in predictable $10-billion
Three Federal Reserve officials on Wednesday said they
believe the U.S. economy is gaining traction despite a recent
slowdown caused by bad weather, allowing the central bank to
stick to its plan to wind down bond-buying this year.
The yield on benchmark 10-year Treasury notes
fell to 2.710 percent after the China flash PMI report, compared
with Wednesday's U.S. close of 2.734 percent.
The yen, which often gains in line with investors' aversion
to risk, got a leg up against its rivals after the China flash
PMI report. The dollar's early gains unravelled and it slipped
about 0.4 percent to 101.85 yen, moving further away from
a two-week high of 102.73 yen hit on Tuesday.
The euro lost 0.3 percent to 140.11 yen, after it
hit a three-week peak above 141.00 yen on Tuesday.
The dollar index gave up about 0.1 percent to 80.065,
moving back toward its Wednesday low of 79.927, which was its
weakest since late December.
The euro added about 0.2 percent to $1.3756, not far
from the previous session's high of $1.3773, which was its
highest peak since Jan. 2.
In commodities markets, U.S. crude gave up earlier
gains and shed about 0.1 percent to $103.22 a barrel, moving
away from a four-month high hit on Wednesday after forecasts for
more cold weather next week.
Three-month copper on the London Metal Exchange
dropped 0.8 percent to $7,128 a tonne, moving away from
Wednesday's peak of $7,220, its highest since Jan. 27.
"Markets are pretty sensitive to bad news coming out of
China, and they probably should be given its role as a major
purchaser of copper," said economist James Glenn of National
Australia Bank in Melbourne.
Spot gold rose about 0.2 percent to $1,312 an ounce.