Asian shares fall after disappointing U.S. earnings
Asian shares fell on Monday as lackluster earnings from leading U.S. companies and a sharp drop in Japan's exports, a key driver of the world's third-biggest economy, dented risk appetites and prompted investors to take profits on recent gains.
The euro, however, crept higher after Spanish Prime Minister Mariano Rajoy secured backing for his austerity drive in a vote in his home region of Galicia on Sunday, a result seen taking Madrid a step closer to asking for international aid.
Asian equities followed Wall Street, which had its worst day since late June on Friday when barometers of the overall U.S. economic health, General Electric and McDonald's , disappointed investors with their results.
Analysts said this provided an excuse for profit-taking in Asian stock markets, many of which had rallied to multi-month highs recently on new global central bank easing and the European Central Bank's plan to buy bonds of struggling euro zone countries that ask for aid.
The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> fell 0.4 percent but trimmed earlier losses. South Korean shares <.KS11> fell 0.2 percent, recovering from an earlier drop of over 1 percent while Australian shares also curbed earlier losses to fall 0.6 percent.
Hong Kong shares bucked the trend and inched up 0.2 percent, hovering near a seven-month high touched last week, with bourse operator Hong Kong Exchanges (HKEx) <0388.HK> strong on expectation that further capital inflows into the territory could buoy trading activity.
U.S. stock futures were up 0.3 percent to hint at a firm Wall Street open, but European shares will likely decline, with financial spreadbetters expecting London's FTSE 100 , Paris's CAC-40 and Frankfurt's DAX to open down as much as 0.6 percent.
"Profit-taking is overshadowing buying because any forward momentum has been exhausted," Oh Tae-dong, an analyst at Taurus Securities in Seoul wrote in a note to investors. He said he expects the Korea Composite Stock Price Index to hover around current levels for the time being.
The Korea's index was still up around 9 percent from lows hit in late July. The index hit a 5-month high in September.
Australian shares scaled a 15-month high last week and the benchmark index was up nearly 6 percent since a low on September 5.
"After a rally of several weeks, buying tends to run out of steam while profit takers become more trigger happy," said CMC markets analyst Ric Spooner.
Japan's Nikkei average <.N225> turned positive, gaining 0.2 percent as the yen fell to a two-month low against the dollar, helping exporters.
The dollar hit a two-month high of 79.60 yen, as a break above a key technical level spurred further buying.
Data on Monday showed that, year-on-year, Japan's exports in September fell at their fastest rate since the February 2011 earthquake, and the mood among manufacturers was at its lowest since early 2010.
The reports reinforced concerns that Japan may slide back into recession as sales to China and Europe sag amid the global slowdown and domestic demand, led by rebuilding from last year's disaster, loses momentum.
A Reuters poll showed that China, the world's second-largest economy, could stage a tepid economic rebound in the fourth quarter on higher public infrastructure spending, though growth will remain lethargic through 2013.
U.S. crude erased earlier losses to rise 0.5 percent to $90.52 a barrel and Brent added 0.6 percent to $110.83.
Weaker equities weighed on Asian credit markets, pushing out the spread on the iTraxx Asia ex-Japan investment-grade index wider by 4 basis points.
MIXED SIGNALS IN EUROPE
The euro was resilient despite mixed signals from the euro zone over the progress of its three-year debt crisis, trading up 0.3 percent at $1.3053.
Germany raised new hurdles on Friday to using the euro zone's rescue fund to inject capital directly into ailing banks from next year, limiting the impact of a key agreement by European Union leaders on Thursday to establish a single banking supervisor from 2013.
But Spain and Greece were still expected to get aid, possibly next month and improving investor confidence was evident in government bond yields for highly-indebted Italy and Spain, which tumbled on Friday to multi-month lows after successful debt sales in both countries.
Some indicators were more cautious as investor focus turned to the corporate earnings seasons now under way in the United States.
The CBOE Volatility index , a gauge of expected volatility in the S&P, jumped 13.5 percent to close at 17.06 on Friday. It hit a five-month high earlier on Friday.
Spot gold recovered from a fresh six-week low of $1,713.39 an ounce hit earlier, and last traded up 0.4 percent at $1,726.16 on bargain hunting.
(Additional reporting by Somang Yang in Seoul and Victoria Thieberger in Melbourne; Editing by Simon Cameron-Moore)