* MSCI Asia ex-Japan capped, Nikkei turns positive
* Euro hovers near 7-week lows vs dollar
* China manufacturing data lacklustre, but no recession seen
* European shares likely narrowly mixed
By Chikako Mogi
TOKYO, March 1 Asian shares were capped on
Friday, with sentiment dented by lacklustre manufacturing data
from China and worries over the economic fallout from Italy's
political confusion as well as possible U.S. spending cuts.
European markets are seen narrowly mixed, with financial
spreadbetters predicting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX would open between a
0.1 percent rise and a 0.2 percent fall. Italy's main FTSE MIB
stock market index is expected to open down 0.2
A 0.1 percent drop in U.S. stock futures also hinted
at a weak Wall Street start.
But losses were limited by renewed confidence that major
central banks will keep taking stimulative steps to support
China's factory growth cooled in February to multi-month
lows after domestic demand dipped to weigh on firms already hit
by slack foreign sales, two surveys showed on Friday,
underlining the country's patchy economic recovery. But it does
not signal China's economy is slipping into another slowdown,
China's February official purchasing managers' index (PMI)
came in at 50.1, slightly below a 50.2 Reuters poll consensus
and the 50.4 posted in January. A private survey showed the
final HSBC PMI fell to 50.4 after seasonal adjustments from
January's two-year high of 52.3, in line with a flash reading.
"While comfort can be sought from the fact that the Chinese
economy remains in expansion territory, the dip from prior PMI
readings does illustrate that the recovery is far from linear
and that there are still a few bumps in the road," said Tim
Waterer, senior trader at Sydney-based CMC Markets.
The MSCI's broadest index of Asia-Pacific shares outside
Japan was down 0.1 percent, after ending
February up 0.5 percent, showing muted reaction to Chinese data.
Australian shares slipped 0.4 percent, pulling back
from 4-1/2-year highs touched in the previous session, as big
miners lost ground on lower metal prices. South Korean markets
were closed on Friday for a public holiday.
The Australian dollar, which is sensitive to data
from China, Australia's largest trading partner, was up 0.2
percent to $1.0230.
Japan's Nikkei stock average erased earlier losses
to rise 0.5 percent, lifted by expectations for strong
reflationary measures from the Bank of Japan in coming months.
Stocks in Indonesia edged higher to a fresh record. Data
showed Indonesia's trade deficit narrowed slightly in January
from the previous month as exports posted their smallest fall in
nearly a year, reflecting recovering global demand and providing
early hope that the nation's external balances may improve in
From Japan, Friday's data showed Japanese companies cut
spending on plant and equipment in October-December by 8.7
percent from the same period last year, down for the first time
in five quarters amid a slump in exports, showing the world's
third-largest economy was still struggling to find a solid
In contrast, a drop in new U.S. claims for jobless benefits
last week and a sharp rise in factory activity in the Midwest in
February suggested the U.S. economy is improving.
The relative outperformance of the world's leading economy
over Japan's may soon turn the Japan-based yen selling into
U.S.-led dollar buying, giving a fresh push higher in the
dollar/yen, traders say.
The dollar inched up 0.1 percent to 92.65 against the yen
One factor that could cloud such a positive outlook is the
uncertainty over the possible extent of economic damage from the
$85 billion in automatic across-the-board "sequestration"
spending cuts in the United States set to begin taking effect on
"Financial markets are eerily calm about the issue. Nobody
is talking about the sequestration, and I worry about the
seeming lack of interest when market sentiment is far from
stable after sharp swings following the Italian election," said
Hiroshi Maeba, head of FX trading Japan at UBS in Tokyo.
He said reaction, if any, will likely come in equities and
bonds first and spill over to forex, hitting risk-sensitive
currencies which may possibly underpin the dollar.
The International Monetary Fund said on Thursday it would
likely cut its 2013 growth forecasts for the United States by at
least a 0.5 percentage point if the cuts are fully implemented.
The IMF now projects that the U.S. economy will grow 2 percent
"The $85 billion in spending cuts is simply too small to
make much of a difference to the economy and although it could
cause some problems, it will have no bearing on influencing
investor allocations among different asset classes," said Ed
Meir, an analyst at INTL FCStone, in a note.
U.S. crude fell 0.1 percent to $91.93 a barrel, after
earlier hitting a 2013 low of $91.43. Brent crude fell
0.3 percent to $111.05 after falling to a six-week low of
$110.86 earlier. Oil prices were weighed by concerns about the
global economy and the strength of demand.
Spot gold inched down 0.1 percent to $1,578.81 an
ounce after dropping more than 1 percent on Thursday and ending
February with its fifth straight monthly drop, the longest
string of monthly declines since 1996.
The euro was up 0.1 percent to $1.3074, but near a
seven-week trough of $1.3018 plumbed earlier in the week.