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 Japan's Nikkei <.N225> again led the way with a loss of 1.2 percent,
hurt in part by a firm yen. MSCI's broadest index of Asia-Pacific
shares outside Japan <.MIAPJ0000PUS> eased 0.2 percent, while
Seoul's KOSPI lost 0.6 percent <.KS11>.
The week ahead has plenty of event risk with a raft of global
business surveys and jobs data from the United States to offer a
clearer view on how well the global economy is faring, while the
European Central Bank (ECB) might well ease at its meeting on
Thursday.
Investors will be hoping this month is not a repeat of January,
given MSCI's global index <.MIWD00000PUS> posted its largest monthly
decline since May 2012. Emerging markets <.MSCIEF> lost 6.6 percent
for their worst January since 2009.
Not helping was another downbeat report from China where the
official Purchasing Managers' Index (PMI) dipped to 50.5 in January
from December's 51, in line with market expectations.
Analysts cautioned that the ongoing Lunar New Year holiday, which
began on January 31, probably dragged on output as manufacturers
shut up shop for China's biggest annual holiday.
There was better news from South Korea where the PMI edged up to its
highest in eight months, a further sign of growth after surprisingly
upbeat industrial output figures last week.
"Manufacturing conditions continue to improve in Korea, boosted by
stronger new orders on the external front," said HSBC economist
Ronald Man. "This suggests that Korea is on track for a gradual
export-led recovery."
Europe and the United States release their versions of the PMI later
Monday and expectations are they will show continued growth, which
could help reassure skittish investors.
SECOND-GUESSING THE ECB
However, while the euro zone is slowly recovering inflation is
getting dangerously low, piling pressure on the ECB to take further
policy action. <TOP/CEN>
Inflation in the region ran at just 0.7 percent for the year to
January, a level that has prompted the central bank to ease in the
past.
"We think the low inflation readings in the euro area, along with
fears of a further decline into deflationary territory, will lead
the ECB to cut the main refinancing rate by 15 basis points, and to
cut the deposit rate by 10 basis points," said Dean Maki, an
economist at Barclays.
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"Advanced economy growth is benefiting from the very accommodative
monetary policy that has been fostered by low inflation readings."
This relative improvement in growth is one reason investors have
been switching funds out of emerging markets and into the developed
world.
The prospect of a further easing in Europe has also weighed on the
single currency, pinning it near 10-week lows at $1.3485 on Monday
following a break of major support at $1.3506.
The euro has likewise fallen sharply on the yen in the last few
sessions and was up just a shade on Monday at 137.86, having been at
its lowest since November.
The Japanese currency was aided by safe haven flows amid the strains
in emerging markets and gained broadly. The dollar was stuck at
102.24 yen but did find support above recent lows around 101.77/85.
The same flight from risk boosted the major bond markets, with
rising prices driving yields on the benchmark 10-year U.S. Treasury
note down to 2.66 percent and again near levels not seen since
mid-November.
In commodities, gold failed to benefit as much and actually lost
ground over the past week to stand at $1,243.35 an ounce on Monday.
Brent oil was off another 31 cents at $106.09 a barrel, having
suffered its biggest monthly loss in four months. U.S. crude eased
63 cents to $96.86.
(Editing by Shri Navaratnam and Eric
Meijer)
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