By Kenan Machado
Asian shares were broadly weaker Tuesday, with Chinese stocks stabilizing after Monday’s slump and Japanese stocks falling in reaction to the dollar’s weakness.
Tokyo investors returned from their Monday holiday and sold shares in reaction to the slide in the dollar on Friday after disappointing U.S. economic data added to skepticism about more Federal Reserve interest-rate increases this year.
The dollar has continued to weaken with the euro getting above $1.15 for the first time in 14 months in Asian trading.
The Nikkei /zigman2/quotes/210597971/delayed JP:NIK +0.34% fell 0.6% to below the psychologically-important 20,000 level as the dollar /zigman2/quotes/210561418/realtime/sampled JPYUSD -0.6960% slid to ¥112.20 Tuesday from ¥112.63 in late New York trading on Monday. Exporters were among the biggest decliners in Japan because their offshore earnings are eroded by the yen’s strength.
The Wall Street Journal Dollar Index fell 0.3%.
Stocks of Japanese insurers also lagged as bond yields fell, as has been the case in recent days. Dai-ichi Life /zigman2/quotes/208507587/delayed JP:8750 -0.09% and Mitsubishi UFJ /zigman2/quotes/207520099/delayed JP:8306 +0.39% slid at least 2% at one point Tuesday.
Market participants are looking to policy statements on Thursday from both the Bank of Japan and the European Central Bank.
Investors are expecting hawkish comments from the ECB, says Hisao Matsuura, chief strategist at Nomura Japan. A hawkish ECB could hurt Tokyo stocks as it could keep the dollar weak and lift the yen, as well as widen the gap between the European and Japanese bond yields, making it more difficult for the BOJ to keep rates low. “I don’t see any upside [for stocks] for now,” he added.
Meanwhile, Chinese stocks tried to recover after sharp declines on Monday, which saw the Shenzhen Composite Index closing down 4.3% and Shanghai Composite Index down 1.4% then. Leading indexes ultimately closed mixed Tuesday after early gains. The Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP +1.84% closed down 0.3% while the Shenzhen Composite /zigman2/quotes/210598015/delayed CN:399106 +2.15% was up 0.6%.
Australian stocks, which lagged the stock gains seen in much of Asia Pacific on Monday, were the worst performing in the region Tuesday morning. The S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO +0.25% was down 1.2%, as the country’s big banks, which are heavily weighted on the index, weakened over 2%.