TOKYO (Reuters) – Asian shares edged higher on Tuesday but were capped by concerns over global growth prospects, especially in the world’s second-biggest economy China, and expected weak U.S. corporate earnings.
The International Monetary Fund cut its global growth forecast on Tuesday to a 3.3 percent expansion for 2012, down from its July estimate of 3.5 percent, making it the slowest year of growth since 2009. It warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
The IMF also said on Tuesday China’s economic growth is expected to weaken to 7.8 percent this year, warning of risks to emerging Asia if the euro zone crisis worsens and the United States does not avoid its “fiscal cliff”.
The IMF’s World Economic Outlook preceded its twice-yearly meeting scheduled in Tokyo later this week, and followed a similarly grim report from the World Bank, which on Monday cut forecasts for the East Asia and Pacific region. It said the slowdown in China could worsen and last longer than expected.
Global shares and oil fell on Monday on the report.
U.S. equities fell on Monday ahead of corporate earnings reporting season which starts Tuesday, as analysts forecast third-quarter earnings to fall for the first time in three years.
The MSCI index of Asia-Pacific shares outside Japan was up 0.1 percent, Australian shares added 0.3 percent and South Korean shares were up 0.1 percent.
However, Tokyo’s Nikkei stock average opened down 0.5 percent, resuming trading after a holiday on Monday.
“People are basically waiting for the U.S. earnings to see just what kind of impact the general slowdown, particularly in China, has had on companies’ earnings,” said Toshiyuki Kanayama, senior market analyst at Monex.
U.S. crude oil futures were up 0.7 percent to $89.95 a barrel and Brent was up 0.5 percent to $112.39.
Euro zone debt crisis: r.reuters.com/hyb65p
Chinese vs U.S. equities: link.reuters.com/wun22t
IMF forecasts: link.reuters.com/ran23t
The euro traded at $1.2975, off its two-week peak of $1.3072 reached on Friday. The risk-sensitive and commodity-related Australian dollar inched up 0.3 percent to $1.0211, after hitting a three-month low of $1.0149 on Monday.
Uncertainty over whether Spain will request external aid to help streamline its huge public debt remained after euro zone finance ministers met on Monday to discuss issues related to the region’s debt crisis, including what needs to be done to establish a single supervisory authority for euro zone banks.
The Eurogroup finance ministers launched their permanent 500 billion euro bailout fund on Monday but said Spain, the country widely expected to be first to draw on it, was taking steps to overhaul its economy and did not need a bailout for now.
“Markets look as if they are tiring of the current stand off between Spain and Europe on the details of bailouts etc … This may start to drag more on equity/commodity markets in the sessions ahead,” Westpac Institutional Bank said in a research note. The European Central Bank’s new programme to buy bonds of struggling euro zone states, aimed at reducing their borrowing costs, is conditional on the countries asking for help.
Greece, which was the focus of market jitters before Spain, said international lenders are considering giving the country two more years to reach its budget deficit reduction targets, and the extra time could be financed without more money from the euro zone.
Investors, who have remained largely cautious about putting money into riskier assets, have instead been buying higher-yielding credit products with growth prospects.
The Philippines, despite its junk bond rating, was likely to draw foreign investors when Asia’s largest issuer of sovereign debt in the global market is set to return this month with a $1 billion global peso note offer.
Asian credit markets were softer early on Tuesday, with the spread on the iTraxx Asia ex-Japan investment-grade index wider by 2 basis points.
(Additional reporting by Sophie Knight in Tokyo; Editing by Michael Perry)
