Asian stocks rebound from Nikkei drop; stronger US data encourage traders

BEIJING, China – Asian stocks rebounded Friday from Tokyo’s sharp decline after investors were encouraged by positive U.S. economic news.

Oil stayed above $96 a barrel on signs of steady American hiring and stronger retail sales despite mounting signs of weakness in China’s economic recovery.

Tokyo’s Nikkei 225, the regional heavyweight, gained 2.4 per cent to 12,748.33, rebounding from Thursday’s 6.4 per cent plunge that took the index into “bear market” territory.

China’s benchmark Shanghai Composite Index gained 0.2 per cent to 2,152.96, coming off Thursday’s 2.8 per cent slide to its lowest close in six months. Hong Kong’s Hang Seng gained 1 per cent to 21,093.50 and Seoul added 0.2 per cent to 1,885.63.

Markets are jittery about the possibility the U.S. Federal Reserve might wind down its stimulus, but were steadied by data showing U.S. retail sales rose 0.6 per cent in May, their strongest showing in six months. Also, the number of Americans seeking unemployment benefits was smaller than expected last week.

“Gains in US stocks overnight will help to calm sentiment,” said Credit Agricole CIB analyst Mitul Kotecha in a report.

Taiwan’s Taiex fell 0.4 per cent to 7,916.76 and Sydney’s ASX S&P 200 rose 1.7 per cent to 4,776.60. Market benchmarks in Singapore, Manila, Jakarta and New Zealand also gained.

On Wall Street overnight, the Dow Jones industrial average rose 1.2 per cent and the Standard & Poor’s 500 index added 1.5 per cent.

Markets in France, Britain and Germany also rose.

Japanese markets have weakened following a burst of euphoria over Prime Minister Shinzo Abe’s economic turnaround plan. Markets had surged 50 per cent since the start of the year but doubts are mounting about whether Abe’s plan will work.

The Nikkei’s plunge Thursday took the Japanese market to a 20 per cent decline from its May 22 high — the definition of a bear market.

Markets have been uneasy since Fed chairman Ben Bernanke said the U.S. central bank might pull back on its $85 billion-a-month bond-buying program — known as quantitative easing — if U.S. economic data, especially hiring, improve.

Investors expect a reduction in the Fed’s asset purchases later this year. Such stimulus has been a key driver of the rally in stock markets and other asset prices. Analysts say markets are looking ahead to next week’s Fed policy meeting for more guidance on the scale and timing of any reductions.

“The markets now appear to be in panic mode over the prospect of a tapering of QE3 in the U.S., even though the Fed itself has stressed that monetary policy would remain ‘highly accommodative’,” said economist Julian Jessop of Capital Economics in a report.

Sentiment about China has turned pessimistic after May exports and retail sales weakened, fueling concern the recovery for the world’s second-largest economy might be stalling.

News reports said Eurozone finance ministers were due to meet Friday in Rome to discuss possible support for banks. The Wall Street Journal said that might include agreement on using up to 60 billion euros to rescue financial institutions.

“Such a deal would likely be viewed as positive as other components of the banking union will take a long time before they are implemented in full,” said Credit Agricole CIB’s Kotecha.

In currency markets, the euro rose to $1.3348 from $1.3345 late Thursday in New York. The dollar rose to 94.96 yen from 94.87 yen.

Benchmark oil for July delivery rose 5 cents to $96.74 after gaining 81 cents on Thursday on improved U.S. economic data.