Asian shares gain as Europe show sign of resolving issues

Asian markets were all in the red as of this afternoon’s trading on the back of not very encouraging news from Europe.

Losses were largest in Hong Kong, Korea and Australia where the benchmark ASX200 was trading more than 2% lower an hour before the market close. The MSCI Asia Pacific index was 1.3% lower at noon in Tokyo.

All eyes are on the outcome of the current Euro zone summit, which many traders are speculating won’t have the silver bullet needed to address fragility in money markets. Risk appetite is coming off the table and the Australian dollar is no better barometer, giving away large losses during the session and last trading at 100.89 U.S. cents. Parity looks like being tested if sentiment doesn’t improve overnight.

In regional economic news, China booked 4.2% inflation last month, the lowest in 14 months and below market consensus estimates of 4.4%. The fourth month of lower inflation might prompt policymakers to start easing efforts in 2012 as the impact of European debt problems start to hurt the world’s second largest economy.

Interest rates look like possibly coming down in the first quarter of 2012, as well as loosening of reserve ratio requirements. Still, that did little to help insulate commodity prices or producers, with copper rising only slightly to US$3.49 after falling during the week.

The Australian materials index was 2.9% lower an hour before the close with key names dragging the market lower.

The Japanese Yen continues to hold onto its recent gains with the JPY/USD last trading at 77.67. The Euro is still vulnerable, unable to shake off the 1.33 mark against the dollar with more weakness over the weekend should the silver bullet result not materialise.

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