Reuters: Market News: GLOBAL MARKETS-Shares steady as Q1 ends; eyes on Europe, China

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GLOBAL MARKETS-Shares steady as Q1 ends; eyes on Europe, China Mar 30th 2012, 03:56 Thu Mar 29, 2012 11:56pm EDT * MSCI Asia ex-Japan up 0.1 pct, investors cautious * Asia ex-Japan index up 11 pct on quarter, best since Q3 2010 * Nikkei inches down 0.2 pct; still up 19 pct for quarter * Japan stocks to log best Q1 performance in 24 years By Chikako Mogi TOKYO, March 30 (Reuters) - Asian shares steadied on Friday as the region's benchmark indices marked their best first quarter in over 20 years and investors awaited a meeting on a possible euro zone firewall and Chinese data that may dictate market trends in coming months. MSCI's broadest index of Asia Pacific shares outside Japan inched up 0.1 percent, in positive territory after a two-day decline, but still off a one-week high hit earlier this week. The index is set for a quarterly gain of about 11 percent, the best showing since the third quarter of 2010 and best first quarter in 21 years. The index then ended up 19 percent. Japan's Nikkei average slipped 0.2 percent, retreating from Thursday's one-year high, but is up more than 19 percent and set for its best first quarter in 24 years. Markets remained on an uptrend through the first quarter as massive liquidity injections from global central banks soothed jitters about a credit crunch in the euro zone, just as it became certain Greece would secure a crucial bailout fund. Improving U.S. data also buoyed prices, offsetting deteriorating European conditions and growing doubts over China's resilience. Near the quarter-end, however, investor sentiment across asset classes turned bearish due to fears of a potential growth slowdown, with European troubles back in focus and concerns about China, the world's second largest economy. "Europe is the biggest risk factor in the second quarter, with elections in Greece and France potentially fuelling doubts about commitments to fiscal reforms if those opposed to austerity measures win," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo. "Failure to ratify a permanent bailout fund before its scheduled launch in July could rattle financial markets," he said. European Union economic and financial affairs ministers meeting in Copenhagen on Friday and Saturday are due to finalise a financial firewall that should help the euro zone's highly indebted economies, such as Italy and Spain, but there is discord about the size of the rescue fund. With financial markets starting to price in concerns about a slowdown in China, official China manufacturing PMI for March due on Sunday presents the next risk to assets with close links to Chinese growth, such as the Australian dollar, analysts at Barclays Capital said. END-QUARTER ADJUSTMENTS Despite caution over risk taking, quarter-end repatriation flows drove up such riskier assets as the Australian dollar and the euro. The euro was up 0.4 percent to $1.3350, up from its lowest level in three sessions of $1.3251 hit on Thursday when concerns about slow progress in debt-cutting efforts in the euro zone's large and indebted countries undermined the currency. The Aussie also inched up 0.2 percent to $1.0395. "Some currencies are up on seasonal repatriation flows with the end of the quarter, totally unrelated to the fundamental trend," said Hideki Amikura, forex manager at Nomura Trust. Amikura said concerns about slowdowns in China and challenges facing the euro zone fiscal reforms were a done-deal and whether the U.S. economy remains on a recovery course to maintain yield differentials is a far more significant factor for market trends in the second quarter. "U.S. macro data from April is key to gauging the Federal Reserve's monetary policy direction, which shapes the U.S. yield curve and affects money flows," he said. The degree of commitments to accommodative policy from the United States and Japan will determine the dollar/yen, which Amikura expects to trade between 80-85 yen in April-June. As risk aversion trades return, the structure of currency flows into Europe is undergoing significant changes, Morgan Stanley said in a research note. "The composition of inflows, shifting away from long-term capital towards short-dated funds, has increased the vulnerability of the EUR in our view," it said. New U.S. claims for jobless benefits fell only slightly last week, missing forecasts for a greater decline, but the level was the lowest since April 2008, while another report showed U.S. gross domestic product expanded 3 percent in the fourth quarter as expected. OIL REBOUNDS Traders took the opportunity to cover short positions and bought on price dips after oil tumbled in the past two sessions on growing talks of a release of strategic petroleum reserves by some consumer nations and a surge in U.S. crude inventories. Brent crude was up 0.3 percent to $122.78 a barrel after settling down $1.77 on Thursday. U.S. crude futures rose 0.7 percent to $103.52 a barrel on Friday after losing $2.63 the day before. Asian credit markets were weak, with the spread on the iTraxx Asia ex-Japan investment-grade index wider by 5 basis points. Link this Share this Digg this Email Reprints

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