Asian shares sag on Chinese growth anxiety, emerging currencies

Thu Jan 23, 2014 6:25pm EST
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By Dominic Lau

TOKYO (Reuters) - Asian shares were off-color on Friday, extending the previous day's weakness as disappointing Chinese manufacturing data raised concerns over the economy, and investors sought safety in gold and the yen.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.1 percent, having fallen 1.3 percent in the previous session to a 4-1/2 month low following the Chinese factory activity report.

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 low and the Russian rouble 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 dollar tumbled against the euro, Swiss franc and the yen, however. It .DXY fell 0.9 percent against a basket of major currencies, marking its worst one-day decline in three months and hitting a three-week trough.

The euro was quoted at $1.3696, near a more than one-week high after climbing 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.   Continued...

Traders work on the floor of the New York Stock Exchange January 14, 2014. REUTERS/Brendan McDermid