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The euro pulled up from near a record low against the Swiss franc on Tuesday after Chinese inflation figures provided some relief that the country would not get more aggressive on tightening policy, providing a broad boost to risky assets.
China's consumer prices rose 5.5% in May, a tad faster than the 5.4% estimated by a Reuters poll of economists, while retail sales came in marginally higher than forecast and industrial output was slightly lower.
Analysts say while the data suggests China's economy is slowing, the slowdown is not as much as some feared, leaving the authorities free to fight inflation.
Shares in Japan and China rose while Brent crude edged higher after the data, although other global worries such as a faltering U.S recovery and Europe's sovereign debt crisis continue to weigh.
The safe-haven Swiss franc held near a record high against the euro in Asia, benefiting from the ongoing European debt crisis, while the dollar stayed under pressure as other currencies like the Australian dollar squeezed higher. "The market got caught short. The whisper number for (China's) CPI was 6% … so we're seeing a round of short covering on the back of that," said Sue Trinh, senior currency strategist at RBC in Hong Kong. The euro's intraday rebound took it back above $1.44 to challenge near-term resistance in the $1.4430/50 zone. A clean push through that resistance to the $.4470/80 area would brighten the single currency's outlook for now, traders said. The market is now turning its attention to inflation figures in other parts of the world, and most importantly the May data on U.S. retail sales for signs on whether the sudden slowdown in the economy is hampering household spending.
GREECE JITTERS GAIN MOMENTUM
Uncertainties over Greece's looming debt problem intensified after S&P on Monday slashed Greece's credit rating to lowest-rated in the world, saying the debt-laden country is increasingly likely to restructure its debt in a way the agency would consider a default. For more, see
European leaders are due to finalise a new rescue package worth about 120 bln euros for Greece at a Brussels summit on June 23-24, but deep divisions remain about how to get the private sector involved. Concern is growing that Greece will eventually have to restructure its 340-bln-euro debt load.
"If a compromise cannot be reached between these positions, there is a chance that the second rescue effort disintegrates, leaving Greece at the mercy of the bond markets," said Karl Schamotta, market strategist at Western Union Business Solutions, in Victoria, British Columbia.
"One suspects that policymakers will avoid such a dire outcome, but the uncertainty is weighing on investment decisions," he said.
Japan's Nikkei average edged up slightly with market players citing sporadic buying from Asian investors, though concerns about slower global growth are expected to keep gains in check this week.
Shares of electric power companies jumped after the cabinet approved a scheme to help Tokyo Electric Power compensate people affected by the crisis at its crippled Fukushima nuclear plant.
TEPCO rose as much as 13%.
"Support at 9,400 seems solid. But with both the U.S. and Chinese economy showing signs of losing momentum, the market doesn't have traction," said Toshiyuki Kanayama, a market analyst at Monex Securities.
The benchmark Nikkei rose 0.16% to 9,463.181 and the broader Topix edged up 0.2% to 814.19.
OIL, GOLD UP
Gold rebounded after a 1% drop in the previous session on economic worries, but a weaker dollar could offer support.
Oil rebounded on Tuesday after China said industrial production grew faster than expected in May, easing concerns over a global economic slowdown and soothing worries that Europe's debt crisis would dent energy demand.
Brent crude for July climbed 19 cents to $119.29 a barrel by 0332 GMT, widening its premium to U.S. crude benchmark West Texas Intermediate (WTI) to a record of more than $22 a barrel. July WTI shed 14 cents to $97.16.
Spot gold added $3.88 an ounce to $1,518.61 an ounce by 0017 GMT after falling as low as $1,511.11 on Monday, its weakest since late May. Gold is well below a lifetime high around $1,575 touched in early May.
