Asian shares edged lower Monday after China's move to loosen monetary policy failed to outweigh news that Greece had again failed to form a new government.
China's central bank flooded an extra $64 billion into the market by cutting the reserve requirement ratio, but the move highlighted concerns over the health of the domestic economy.
Stocks inched deeper into territory not seen since mid-January, with the materials sector leading losses.
CIBC World Markets' Patrick Bennet says Beijing is responding to weak economic data released last week.
(SOUNDBITE) (English) CIBC WORLD MARKETS FX STRATEGIST, PATRICK BENNET, SAYING:
"I think it says something about how weak the numbers were late last week, of course we had the trade data which was particularly soft and we were expecting industrial production on the back of that to be weak, indeed that's what it was, so good to see that the Chinese policy-makers are taking an immediate step to respond to the weaker data, but I guess that also deduces some caution that perhaps the outrun is looking softer than was expected."
Bennet says China will continue to tweak monetary policy, and allow the yuan to strengthen.
(SOUNDBITE) (English) CIBC WORLD MARKETS FX STRATEGIST, PATRICK BENNET, SAYING:
"Our view of Chinese policy this year is that there's policy fine-tuning, which has been talked about so often, it will involve further cuts in the RRR, and explicit cuts in interest rates, but also maintaining an appreciation of currency. That would help to balance & fine tune it; it will obviously help more import-heavy growth model we are looking forward to over the next few years."
Failed talks to form a new Greek government weighed on sentiment, pushing the country closer to fresh elections and the growing prospect of bankruptcy and eviction from the euro bloc.
Anti-austerity momentum may grow even in Germany, after Chancellor Angela Merkel's conservatives suffered a crushing defeat on Sunday in an election in Germany's most populous state.
The euro slumped to a 4-month low. The Aussie slipped below dollar parity for the first time in five months.
Arnold Gay, Reuters.
