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 MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> fell 0.5 percent, adding the previous session's 1.3
percent decline following the Chinese factory activity report.
As the yen strengthened sharply against the dollar overnight,
Japan's Nikkei benchmark <.N225> dropped 1.5 percent in relatively
active trade after earlier touching a one-month low. The loss added
to Thursday's 0.8 percent decline.
"Sentiment was already poor because of the poor U.S. jobs data
released early this month, and it was exacerbated by the Chinese
figures," said Naoki Kamiyama, head of Japan equity strategy at Bank
Of America Merrill Lynch in Tokyo.
A decline in the flash Markit/HSBC Purchasing Managers' Index for
China, the world's second-largest economy, reinforced concerns about
global growth, especially in commodity-sensitive emerging markets.
"As capital costs rise and investment slows, commodity prices should
come under pressure, boding poorly for economies linked to China's
old growth model," Morgan Stanley analysts wrote in a note.
Emerging currencies were battered overnight, with the Turkish lira
hitting a record low against the dollar, the South African rand
slumping to a 5-1/2 year trough and the Russian ruble falling to
its weakest in nearly five years.
On top of that the Federal Reserve is expected to continue to dial
back its bond purchases when it meets next week after U.S. jobless
claims data reflected an acceptable, if underwhelming, pace of job
growth — heaping more pressure on emerging country currencies.
The Indonesian rupiah fell 0.2 percent to 12,180 per dollar,
touching a two-week low on Friday morning, while Jakarta shares <.JKSE>
shed 1.2 percent.
The dollar stabilized against the euro, Swiss franc and the yen
after taking a beating in the previous session.
The greenback <.DXY> was up 0.1 percent against a basket of major
currencies, having fallen 0.9 percent, marking its worst one-day
decline in three months and hitting a three-week trough.
The euro was a tad softer at $1.3686, though it remained near a more
than one-week high of $1.3699. The single currency climbed 1.1
percent on Thursday, its biggest single-day gain since
mid-September, on the back of mostly encouraging business surveys
from the euro zone's private sector.
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"We would be cautious of fading this risk aversion move given the
scale of some of the losses in commodity and emerging forex, and the
EUR may stay better supported in the near-term as EUR-funded risk
positions are covered," analysts at BNP Paribas wrote in a note.
The yen advanced 1.2 percent against the dollar in the previous day,
marking its biggest one-day gain since late August. The Japanese
currency took a breather on Friday morning, down 0.2 percent at
103.51 yen to the dollar.
SLOW START FOR 2014
Wall Street has so far gone off to a stuttering start in 2014 after
rallying nearly 30 percent last year.
On Thursday, U.S. stocks fell, with the Standard & Poor's 500 <.SPX>
off 0.9 percent and the Dow Jones industrial average <.DJI> down 1.1
percent to record its third consecutive day of losses. S&P 500
E-mini futures were up 0.1 in Asian trade on Friday.
In response, investors cut their positions in risky assets, buoying
the safe-haven assets of gold and highly-rated government bonds.
Yields on 10-year benchmark U.S. Treasuries hit a seven-week low of
2.7589 percent on Thursday, while those on German Bunds fell to
1.713 percent, also reaching a seven-week low.
Gold gave up some of Thursday's more than 2 percent jump. It was
down 0.2 percent at $1,259.55 an ounce on Friday morning, though
still not far from a six-week high of $1,265.40 set in the previous
day.
U.S. crude futures was little changed at $97.35 a barrel, not far
from a three-week high of $97.84 hit on Thursday after data showed a
larger-than-expected drawdown of distillate stocks caused by
sustained cold.
(Additional reporting by Ayai Tomisawa
in Tokyo; editing by Eric Meijer)
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