TOKYO (Reuters) - Asian stocks and the euro handed back gains and slipped on Thursday after the European Central Bank adopted a hard line on Greece’s debt, dealing a major blow to Athens’ efforts to secure improved bailout terms with its creditors.
Risk appetite, which had warmed earlier in the week on hopes that Greece would gain relief from its creditors, took a hit after the ECB abruptly pulled back its soft treatment of Greek debt and cancelled its acceptance of the country’s bonds in return for funding.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 percent after climbing 1 percent the previous day. Japan’s Nikkei, which surged 2 percent on Wednesday, dropped 1 percent. Shares in South Korea, Malaysia and Singapore were also lower, while Australian stocks bucked the trend and gained.
Investors also became more risk-averse as an extended rally in crude oil petered out. Wall Street snapped a two-day surge overnight, weighed by a slide in energy shares.
Crude oil plunged overnight in one of its biggest daily falls ever as record high U.S. oil inventories ended a four-day rally. In a “dead cat bounce” U.S. crude was last up 0.5 percent at $48.72 a barrel after sinking 9 percent on Wednesday.
A late Wednesday move by China to boost bank lending and energise its sputtering economy failed to lift the mood in the region’s equity markets.
“Although the move by PBOC does ease credit and may be beneficial to stimulating demand, it is also a clear sign that growth in China is declining at faster rate than previously thought and as such could have dampening effect on demand throughout the Asia region,” Boris Schlossberg, managing director at BK Asset Management, wrote in a note to clients.
China’s system-wide cut to bank reserve requirements also caused most emerging Asian currencies like the South Korean won and Indonesian rupiah to fall.
“It will increase expectations for more easing by Asian central banks. It will put pressure on Asian FX to weaken,” said Sean Yokota, head of Asia strategy for Scandinavian bank SEB, in Singapore.
The euro traded at $1.1353, having fallen as far as $1.1315. It has completely reversed a short-covering rally that lifted it to $1.1534 on Tuesday.
The dollar was little changed at 117.265 yen, with the market awaiting the U.S. employment-related data later in the session as a preview to Friday’s all important non-farm payrolls.
Additional reporting by Jongwoo Cheon in Singapore; Editing by Eric Meijer & Shri Navaratnam