Rise in shares of Asia topped by worries on growth

The share market saw an Asian shares rise

The share market saw an Asian shares rise

The share market on the 9th of October saw an Asian shares rise, but was still topped by the concerns over the prospects of global growth. These concerns were based mainly on the expectedly weak U.S. corporate earnings and a slump in China’s economic growth, which is the second largest in the world.

The Situation:

During the forecast of the global growth on the 9th of October, the International Monetary Fund reduced its expansion by about 3.3 percent for the year 2012. The estimate was brought down from 3.5 percent in the month of July thereby marking this year as the slowest in terms of growth since the year 2009. It also warned the European as well as the US policy makers that their failure to revive the economic problems would indefinitely prolong the slump. The International Monetary Fund on the 9th of October also stated that it is expected for China’s economic growth to weaken to about 7.8 percent during this year. It has also warned Asia about the risks that are emerging towards them in case the crisis worsens for the eurozone and the US fails to avoid a fiscal cliff.

The Report:

The World Economic Outlook of the IMF was followed by a grim report that arrived from the World Bank and preceded the twice yearly meeting of the IMF that is scheduled to be held in Tokyo sometime later this week. The report cut forecasts on the 8th of October for both the Pacific and the East Asian region. It also stated that the slowdown in China’s economic growth would not only worsen but also last much longer than initially expected. The MSCI index for the shares of the Asia-Pacific regions outside Japan showed an Asian shares rise by nearly 0.6 percent. The shares for Australia also rose by about 0.5 percent thereby showing a fresh high after a period of nearly 14 months. The slowdown of China’s economic growth is a major setback in the midst of a market situation that showcased a notable Asian shares rise. There are numerous reports that also showed weak U.S. corporate earnings in the third quarter of the year.

The overall situation:

Just ahead of the reports session that begins on the 9th of October, there was a fall in the equities of the US stressing on the fact of the weak U.S. corporate earnings even further. After the report analysts made a forecast that the weak U.S. corporate earnings would fall in the third quarter for most probably the first time in a span of three years. The prices of oil however recovered, with the futures of the crude oil of the US rising by 1.1 percent and reaching $90.28 per barrel. There was a rise in London Copper by about 0.7 percent thereby reaching a per tonne price of $8,238. Due to a recovery in the equities some of the riskier currencies got higher. Like for example the highly risk sensitive Australian dollar saw a gain of 0.5 percent and reached to $1.0229 after being hit by a low for as many as three months. The price of euro also inched up by 0.1 percent and reached to $1.2977.

Richard Meryn
Richard Meryn, Associate Editor Industry Leaders Magazine (www.industryleadersmagazine.com)

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