* MSCI Asia ex-Japan down 0.1 pct, Nikkei opens down 0.4 pct
* Euro hovers near two-year low
* Market not convinced on euro zone borrowing cost outlook
By Chikako Mogi
TOKYO, July 11 (Reuters) – Asian shares inched lower on
Wednesday on worries that the global economic slowdown will hurt
corporate earnings, with the market still unconvinced the euro
zone can decisively bring down struggling member states’
borrowing costs even after yields pulled back.
Prospects for dismal corporate earnings compounded concerns
that a deteriorating global economy has taken a toll on profit
growth, and sent U.S. stocks down for a fourth day on Tuesday.
MSCI’s broadest index of Asia-Pacific shares outside Japan
eased 0.1 percent, while Japan’s Nikkei average
opened down 0.4 percent.
“Sluggish growth is now appearing to manifest itself in the
form of lacklustre earnings, which weighed on U.S. stocks
yesterday,” said Lee Young-gon, an analyst at Hana Daetoo
Securities.
European equities, on the other hand, rose and Spanish and
Italian debt yields eased on Tuesday on the notion that Europe
was moving towards putting its rescue fund into action and as
euro zone finance ministers agreed to give the first batch of
aid to Spain’s troubled banks by the end of July.
Traders were far less upbeat about the euro, which last
traded at $1.2253, pinned near a two-year low of $1.2225
hit in early Monday Asian trade.
Traders found the latest source of uncertainty in a hearing
by the German Constitutional Court into whether the euro zone’s
bailout fund, known as the European Stability Mechanism, and
planned changes to the region’s budget rules are compatible with
German law.
The ESM is a crucial tool in helping to bring down borrowing
costs of indebted nations and breaking the link between the
sovereign debt problem and the banking sector stress in Europe.
“Investors have grown sceptical about the decision-making
process in Europe and this has hurt euro sentiment,” said Andrew
Wilkinson, chief economic strategist at Miller Tabak & Co in New
York.
“Meetings come and meetings go with investors fast-learning
that ensuing policy statements appear to contain still-wet ink
on the parchment,” he said.
The euro zone’s three-year debt crisis, which began with its
peripheral members, has engulfed the region’s larger economies
Spain and Italy. Rome said on Tuesday that it may want to tap
euro zone aid to ease its borrowing costs as euro zone finance
ministers struggled to soothe market jitters.
Europe’s financial woes have also fed into the current
deterioration in economic conditions, as evidenced in recent
data from the United States and China, the world’s biggest and
second-largest economies.
China’s benign inflation and weak imports pointed to
softening domestic demand as well as uncertainties over an
external economic downturn, keeping intact expectations that its
second-quarter gross domestic product report due on Friday will
show the lowest growth in at least three years.
Investor risk aversion weighed on commodities and oil.
Brent crude was down 0.1 percent at $97.89 a barrel
early on Wednesday, while U.S. crude inched up 0.4
percent to $84.25 a barrel. Oil fell more than $2 on Tuesday on
an averted oil workers’ strike in Norway and weak China crude
import data.
Gold remained lacklustre, having fallen in recent sessions
in tandem with other assets as liquidation hit across the
markets. Spot gold inched up 0.2 percent to $1,570.49 an
ounce, firmly capped below $1,600.
Gold holdings in the world’s eight major exchange-traded
products fell by the largest one-day amount since late May,
shrinking by 116,427 ounces by the close on Monday to 70.529
million ounces, reflecting some of the investor wariness towards
bullion.
Falling Spanish yields helped to improve sentiment in Asian
credit markets, where the spread on the iTraxx Asia ex-Japan
investment-grade index was 4 basis points narrower
early on Wednesday.
