Asian shares fell today after data showed Japan's economic growth stalled in the second quarter, adding to worries that a global recovery is quickly faltering and prompting investors to sell riskier assets.
Japan's economy expanded just 0.1 per cent in the quarter to June, far less than the 0.6 per cent analysts had expected, as export growth moderated and a recovery in consumption driven by government stimulus ran out of steam.
Slowing growth in its key export destinations such as the United States and China and an uneven recovery in Europe are clouding the outlook further.
"The GDP figures were bad, especially for what it suggests about deflation," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.
Economists polled by Reuters expect Japan's economy to slow further in coming quarters, with some predicting a double-dip recession, and the yen's recent rise to 15-year highs against the dollar is likely to add pressure on exports.
Japan's Nikkei fell 0.9 per cent, weighing on the rest of the region, though technical charts showed it was approaching oversold levels, suggesting it may be due for a rebound.
The MSCI share index for Asia excluding Japan shed a similar amount as investors worried that a clutch of US economic data this week would show further signs of weakness in its economy.
The index lost nearly 2.9 per cent last week on growing concerns about the global recovery, its worse performance in six weeks.
The flight from risky assets boosted the yen against major currencies and sent more buyers into government bonds as investors looked for safe havens.
The dollar fell 0.4 per cent 85.81 yen and the euro shed half of a per cent to 109.39 yen.
Most investors doubted a direct market intervention by the Bank of Japan was on the cards and argued instead the central bank may opt for more quantitative easing to support growth.
The dollar stayed broadly firm against a basket of currencies, briefly touching its highest since July 23.
Japanese government bond futures hit their highest in more than seven years, with September 10-year futures rising 0.19 point at 142.58, after advancing as high as 142.62, their highest since June 2003.
Demand fears
South Korean shares fell 0.8 per cent, led by technology exporters and banking stocks including LG Electronics and KB Financial Group as traders awaited data on US industrial production and earnings from key US retailers for further clues on corporate and consumer demand.
"Concern about the economy is fueling foreign selling. We are also seeing substantial programme selling as the economic and stock market outlooks grow more uncertain," said Lee Sun-yeb, a market analyst at Shinhan Investment Corporation in Seoul.
Gold gained $4 to $US1218.65 an ounce, its strongest in more than a month, as pessimism about the global economic recovery pushed equities down, though a firmer US dollar could cap further gains.
US crude hovered near $US75.43 a barrel, after suffering its worst week weekly performance in six weeks.
Reuters