06 February 2013: Asia recovers on euro zone data

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Asian shares recovered on Wednesday as solid euro zone data calmed nerves stirred by potential political turmoil in Spain and Italy. Strong balance sheet numbers from the European Central Bank (ECB) and new signs of recovering inside the euro zone gave the Euro a new boost. The single currency rebounded strongly. EURO/USD trades at 1.3579. Stock markets in Europe and US also rebounded after dropping steeply on Monday. The Japanese Yen continues to be under pressure. USD/JPY touched 93,91, the highest seen since May 2010.

Investors’ optimism returned when the vast US services sector extended a three year expansion in January. Business activities in the euro zone, simultaneously, showed signs of recovery. US and European stocks rallied and recouped most of their losses after a sharp sell-off and profit taking the previous session sparked by renewed worries on the euro zone debt crisis. Oil- and commodity prices rebounded. Brent crude is trading close to USD 117 a barrel. Also copper prices are up.

The Japanese yen was further weakened by the prospect of a new appointment of Governor of Bank of Japan. The actual candidate is said be “dovish” and in favor of further active monetary easing steps. The present Governor would leave his post in mid-March. These news had Japan’s benchmark Nikkei index to soar 1,3% to a 33-month high. The Australian stock markets are also up accompanied by a strong Australian dollar. British Pound (GDP) is back on lowest levels seen against USD this year at 1.5661.

In the US president Barack Obama urged Congress to pass a small package of spending cuts and tax reforms to delay larger, automatic cuts from going into effect and damaging the economy on March 1. The proposal was quickly rebuffed from Republicans who saw it as a bid for new tax increases. The US Justice Department yesterday initiated legal proceedings against the rating agency, Standard and Poor, which it accuses for manipulating markets and actively contributing to the financial crisis in 2008.

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