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 European shares dipped - a lead Wall Street was expected to follow
by opening around 0.2 percent lower with the focus on U.S.
manufactured goods figures after what has been packed week of
company earnings.
Germany's Ifo survey had set the tone by revealing a hefty fall in
business confidence over the last few weeks, prompting concerns the
region's growth engine and driver of its recovery could be
stuttering
It was the third consecutive fall in an index which monitors the
mood of thousands of German firms, and Ifo's economists admitted the
scale of the decline this month had come as a surprise.
"Geopolitical tensions are taking their toll on the German economy,"
Ifo said. "Companies were also less optimistic about future business
developments."
The euro fell back towards Thursday's eight-month low of 1.3438 and
bonds from Germany to Greece made ground as traders wagered the data
upped the likelihood the European Central Bank will need to provide
the economy with further support.
Shares also clawed back some of their early losses keeping them on
course for a second week of gains. It is a rise that has helped
world stocks gradually push back towards the all-time highs
they reached last month.
Some encouraging U.S. company earnings, reassuring data from China,
and still record-low global borrowing costs have persuaded investors
to look past the rise in tensions in Ukraine and Gaza this week.
Chinese shares rose another 1 percent on Friday to secure their
biggest weekly gain - 5.6 percent - since September last year.
A survey on Thursday showed factory activity in the country expanded
at its fastest in 18 months, dovetailing with hopes that Chinese
authorities will drive through beneficial reforms in the coming
months and years.
At the other end of the spectrum, dollar-traded Russian stocks fell
over 1 percent to take their losses over the last two weeks to 12
percent, while Russian bonds also fell as the country's central bank
unexpectedly raised interest rates.
European officials are to continue talks later over plans to squeeze
Russia over Ukraine with further sanctions following the downing of
a Malaysian Airlines that killed almost 300 people.
A deal is not expected to be struck until next week but options
being discussed include curbing Russian access to capital markets
and arms and energy technology that could hurt both Russian banks
and its huge oil industry.
GROWTH PROSPECTS
As the week drew to a close in Asia, MSCI's broadest index of
Asia-Pacific shares outside Japan was down about 0.3 percent but on
track for solid weekly gain of more than 1 percent. Hong Kong's
benchmark index hovered around its highest in more than three years
after its best week since May.
"The prospect for the global economy has not been too bad thanks to
recently strong U.S. shares and China data, but we should not be
overly optimistic," said Norihiro Fujito, senior investment
strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
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Fujito said that long-only investors have stayed on the sidelines as
events in Gaza and Ukraine have curbed their appetite for risk. He
also said many are also waiting for more positive trading cues,
after the International Monetary Fund cut its 2014 forecast for
global economic growth.
On Wall Street overnight, the S&P 500 eked out a slight gain to its
second record closing high in a row, even after earnings painted a
mixed picture of the economy.
After a run of solid tech sector results this week, Amazon reported
a much bigger loss than expected. The biggest U.S. online retailer's
shares tumbled 10.6 percent in after-hours trade, wiping more than
$17 billion from its market valuation.
EURO NEAR 8-MONTH LOW
The downbeat Ifo survey pushed the euro back towards Thursday's
eight-month low of $1.3438 <EUR=> as another albeit
smaller-than-expected fall in lending to firms in new ECB data
further underscored the bloc's struggles.
The dollar, the dominant force in currency markets again this week,
was up slightly against the yen at a 2-week high of 101.90 aided by
a rise in U.S. government bond yields.
The yen showed little reaction to Friday's Japanese consumer price
data that was in line with forecasts and did not do much to stir
expectations for further monetary easing by the Bank of Japan. Core
consumer prices rose 3.3 percent in June from a year earlier,
matching forecasts.
Gold bobbed at $1,295 an ounce after dropping to a one-month low
overnight. U.S. crude edged down slightly to $101.61 a barrel, while
Chinese growth-attuned copper headed for its fifth weekly rise in
six.
Unrest in the Middle East and Ukraine continued to keep investors
alert for any developments that could have a wider impact on risk
sentiment and markets.
U.S. Secretary of State John Kerry pressed regional proxies to nail
down a Gaza ceasefire on Friday as the civilian death toll soared,
threatening to spread Israeli-Palestinian bloodshed to the occupied
West Bank and Jerusalem.
(Additional reporting by Lisa Twaronite in Tokyo, editing by John
Stonestreet)
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