Asian markets open with modest gains; gold retreats

We’re down to the last day of trading on what’s been an incredibly choppy week of rollercoaster ups and downs. For today, global cues are pointing to a positive start after yesterday’s down day.

Asian markets are posting modest gains this morning, taking their cues from Wall Street, which roared back. The Dow Jones index finished up 423 points: that’s nearly 4 percent higher.

Japan’s Nikkei, Australia’s S&P ASX, Hong Kong’s Hang Seng index and Seoul’s Kospi are all up marginally. Not by a lot, but enough to keep the exchange boards looking green for now.

Japan’s Nikkei share average rose 0.2 percent, boosted by a 4.7 percent jump in Canon Inc shares, which were propelled by a stock buyback plan.

The MSCI index of Asia Pacific stocks outside Japan was up 0.5 percent on the day but still looking at a decline of more than 3 percent on the week.

This week’s manic mood swings of the market point to an underlying nervousness, which these short-term rallies tend to mask. Much of the nervousness springs from Eurozone worries, where the sovereign debt crisis continues to creep up on countries and financial institutions at the core of Europe.

Overnight, four countries - France, Italy, Spain and Belgium - said they are considering banning short selling of stocks of financial institutions, which have come under intense selling pressure on concerns about their exposure to heavily indebted peripheral Eurozone countries.

Analysts are already pointing to the parallels with 2008, at the height of the financial crisis, when stock exchanges imposed a ban on short sales, but couldn’t prevent a crash. The experience of short sales indicates they only dry up liquidity, and set up artificial floors for markets.

Back home too, most analysts are still bearish on the markets, in the absence of specific domestic cues and the prevalence of global uncertainty. So, while we may see a short-term rally today, analysts reckon it’s hard to call a market bottom.

One asset class - gold -that’s been doing exceedingly well in recent days slumped overnight on profit-booking. As we noted on Firstpost yesterday, while gold still has upside potential, it’s not a failsafe one-way bet.

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