Markets regain ground
Markets recovered some ground on Monday on
value hunting after last week's heavy losses, but investors remained wary over
the eurozone despite world leaders calling for Greece to stay in the
monetary union and for Europe to balance austerity with growth. MSCI's broadest index of Asia-Pacific
shares outside Japan rose 0.5%, buoyed by its technology sector which by far
outperformed its peers with a 1.3% gain. Investors scooped cheapened blue
chips, helping to lift tech-heavy Korean equity market above a key chart level.
The pan-Asian index fell to a 2012 low on Friday, having lost about 6% in the
week for its worst weekly performance in nearly eight months. European shares
were likely to be even more cautiously traded than Asia, with financial
spreadbetters predicting that major European markets would open down as much as
1%. US stock futures were up 0.5%, reflecting a lack of market direction.
"Investors saw some attractive valuations in the big tech stocks, which
was the most heavily-hit sector during last week's market plunge, but that's
about as much additional risk that investors are willing to take on at this
point," said Park Suk-hyun, an analyst at KTB Securities. Japan's Nikkei
stock average gained 0.4%, after logging a seventh straight week of losses last
week, its longest such losing streak since the third quarter of 2011. Leaders
of G8 major industrialised nations meeting at the weekend vowed to take steps
to combat financial turmoil and revitalise a global economy threatened by Europe's debt crisis, but they offered no
specific prescription for debt-crippled Greece which holds fresh
elections on June 17. "Today's move is merely a rebound from sharp losses
on Friday and it doesn't have momentum to rise strongly. The G8 outcome lacked
the punch to give much incentive for markets," said Hirokazu Yuihama, a
senior strategist at Daiwa Securities in Tokyo. Currently, many
market players see the main scenario as Greece staying in the euro
and European leaders making some compromises to maintain financial lifelines
for the country. But deepening banking sector instability in Spain heightened concerns
about contagion from Greek political turmoil, keeping investors' risk-aversion
intact at least until the Greek election makes clear whether the nation will
stay or leave the euro, traders and analysts said. "There's a lot of talk
and no substance. Until you get some certainty about Greece and the fear of
contagion eases, the volatility is here to stay," said Savanth Sebastian,
an economist at CommSec. Growth and
fiscal austerity The euro inched up 0.1% to $1.2793, moving away from a
four-month low of $1.2642 reached on Friday, which was not far from its trough
of 2012. But investor nervousness prevented the yen, widely perceived as a safe
haven, to ease significantly from its three-month high against the dollar of
¥79.001 hit on Friday. The yen stood at ¥79.18 on Monday. With a steadying
euro, spot gold added 0.4% to $1 598.46 an ounce, after rising more than 1% on
Friday. The G8 suggested mounting global support for highly indebted eurozone
economies to be allowed to take less strict austerity measures and put more
priority on stimulating growth. Reports also suggested Greece's anti-austerity
forces could soften their stance to avoid a catastrophic outcome for the
nation. Yuji Saito, director of foreign exchange at Credit Agricole Bank in
Tokyo, said the G8 comments were positive, but it did not offer a buying
incentive for the euro. Rather, he was eyeing whether the yen would breach its
200-day moving average, currently at ¥78.50, and trigger the yen's further
climb. Saito said markets were turning to an upcoming European summit on May 23
and comments about the Greece election. The May 23
summit will focus attention on whether European leaders can strike a new
balance between growth and the fiscal reforms deemed vital to fixing the
eurozone's debt crisis and regaining market confidence in the single currency.
Recent opinion polls show Greek voters are returning to the establishment
parties that negotiated its bailout, offering potential salvation for European
leaders. Alexis Tsipras, the Greek leftist who polled strongly in the
inconclusive May 6 election, says he wants talks to keep Greece in the euro. He is
looking to forge ties with likeminded European figures such as French President
Francois Hollande. Oil prices recovered on Monday, with US crude up 0.5% at
$91.90 a barrel, after falling more than 1% on Friday. Brent crude, which
closed at its lowest in 2012 on Friday, rose 0.7% at $107.89 a barrel. China's premier called for
additional efforts to support growth on Sunday, raising hopes for more stimulus
steps to lift demand in the world's second largest economy. He also vowed to
maintain his campaign to cool down its property market."Fear index" rising As risk aversion intensified on
Friday, the CBOE VIX Volatility index, a gauge of investor anxiety that
measures expected volatility in the Standard & Poor's 500 index over the
next 30 days, rose 2.5% to close above 25 for the first time since mid-December.
Asian credit markets stabilised on Monday on short covering after the G8
meeting, but underlying sentiment was defensive, traders said. The spread on
the iTraxx Asia ex-Japan investment-grade index was little changed from Friday, when it
reached its widest level since early January.
France's Hollande steals show in début
In his début in international summitry, Francois Hollande has made a
splash - and held his ground on some sharply defined positions.France's new
leader grabbed attention at both the weekend's Group of Eight summit in Camp
David and at the Nato summit in Chicago ending on Monday, parleying his mandate
from voters in a May 6 election and showing he has his finger on the pulse of
the public back home.An informal European Union summit on Wednesday will cap
his whirlwind first week as French president.Hollande first sped to Berlin to
meet Germany's chancellor, he then painstakingly formed a Socialist-led French
Cabinet. He jetted to Washington, where he mused about his cheeseburger fetish
in an Oval Office get-to-know with President Barack Obama that helped replace
memories of Hollande's America-friendly predecessor, Nicolas Sarkozy.Hollande
held firm on his two trenchant positions at the summits: His call for
pro-growth measures to juice up Europe's lagging economy overshadowed the G-8
meeting, and his promise to break with Nato by pulling French troops out of
Afghanistan ahead of other alliance members weighed heavily on the summit in
Chicago."There was no embarrassing moment for him, despite the fact that
he came right out of the election," said Dominique Moisi, a political
analyst with the French Institute of International Relations, IFRI. "The
difficulty starts when he comes home... but we all know there won't be any
miracles."So far, it's mostly been style over substance. Hollande offered
few details about how he would put his plans into practice.The Socialist French
president fills a seat that was occupied by Sarkozy, who was often dubbed
"Sarko the American" and whose support for a hard line in Iran and Nato's
intervention in Libya drew plaudits from US leaders - including Obama. But at home, Sarkozy's
brash, in-your-face demeanour in part led to his fall from grace at the ballot
box.CharmingSo far, Hollande has
ushered in a more inclusive style as French president, and the charm offensive
has borne fruit. The timing of the summits also played in his favour: Obama,
whose re-election hopes hinge in large part on the American economy's
prospects, echoed Hollande's call for pro-growth policies at Camp David on
Friday and Saturday.That gave Hollande some momentum going into the Nato
summit, where some allies frowned on his early-pullout promises both privately
and publicly.Post-electoral honeymoons don't last forever. Much of the questioning
that Hollande faced by his trailing press corps centred on his persona, such as
his travels in America in 1974 to study a nascent fast food phenomenon and his
rapport with other world leaders. Obama playfully teased him for wearing a tie
to the casual-dress summit in the Camp David woods and called Hollande his "translator" for French
journalists.When one reporter at a French press scrum outside Hollande's Chicago hotel on Monday asked
the president if he felt "American," Hollande replied that "I
don't know how to take the compliment, if that is one"."But I try to
be a Frenchman, who discusses with the Americans - in the hope of making them
understand that we have common interests," he said. "I don't try to
play the American, and I don't need to play the Frenchman: Be myself."It
was aw-shucks charm like that that helped put Hollande, a national lawmaker
from rural central France, into the
presidential Elysée Palace. Hollande made his name nationally for his quick-witted criticism
against a string of conservative governments in France over the last decade,
while leader of the Socialist Party.ArticulateAs
president, he's morphing from critic to cheerleader. At the summits he subtly
claimed credit for France putting on the agenda
such ideas as growth, European-supported recapitalisation of ailing Spanish
banks or eurobonds to help revive Europe's finances. But he's maintained his sober mindset about Europe's big economic problems.But his
personal international rapports are being tested. For all their seeming comity
in Berlin last week, Hollande and Chancellor Angela Merkel have lined up against
one another politically on both Afghanistan and their prescriptions for European economic health. She champions
austerity, he wants pro-growth policies; in Chicago, she reiterated her
"in together, out together" mantra for Nato's Afghan mission.Hollande
came to the US summits a virtual unknown and benefiting from relatively low
expectations. He had first-time introductions to Obama, Merkel, prime ministers
Dimitri Medvedev of Russia and Britain's David Cameron all this week. An aide to one of the other G-8 summit
attendees, who declined to be identified so as to speak freely about inside
details, said that Hollande came across as firm, articulate, and knowledgeable
about the agenda items."So far, so good," the political analyst,
Moisi, said of Hollande's début on the world stage. "I think what he had
to prove was that he was a credible president of France. People had thought
that he wasn't: Not just 'Mr Normal'" - an image Hollande campaigned on -
"but banal."
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