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Asian Markets Are Cautious Ahead of G8 Meeting

CNBC.com
Monday, 6 Jul 2009 | 5:11 AM ET

Asian markets got off to a hesitant start Monday as investor doubts on the staying power of a global recovery kept Asian stocks soggy and currencies subdued ahead of a much-expanded Group of Eight meeting this week.

The air of caution kept the U.S. dollar and bonds supported as safe-havens, while pressuring commodity prices. Investors were still smarting from last week's dismal U.S. payrolls report
which put a question mark over the recovery there, and thus across the globe.

Investors were also wary ahead of the Group of Eight summit in L'Aquila, Italy on July 8-10, which has been expanded to include China and a host of developing nations. China last week floated the idea of discussing the U.S. dollar's place as the sole international reserve currency, causing a brief dip in the currency.

But China also seemed keen to reassure Washington. Speaking to reporters in Rome on Sunday, Chinese Vice Foreign Minister He Yafei said: "The U.S. dollar is still the most important and major reserve currency of the day, and we believe that that situation will continue for many years to come."

That vote of confidence helped the U.S. dollar inch higher in very thin Asian trade. The euro eased to $0.1.3976, from $1.4000 late in Europe on Friday. Crude oil futures were down at five-weeks lows, under $65 a barrel.

Nikkei 225 Average closed down 1.4 percent as hopes of an economic recovery were dented in the wake of last week's downbeat U.S. employment data, dampening investor sentiment. Concerns about the prospects for an early global economic
recovery hit resource-linked shares such as oil and gas developer Inpex and trading houses including Mitsui & Co.

Seoul shares ended 0.6 percent higher in volatile trade, lifted by a spike in Samsung Electronics on strong quarterly earnings forecasts, while display issues also rose on the back of strengthening panel prices.

Australian shares fell 1.2 percent to their lowest close since May 28, led down by miners such as BHP Billiton and Rio Tinto on weak metal prices and doubts over the prospects for an economic recovery. Major banks also fell as investors turned cautious ahead of the upcoming company earnings reporting season.

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Hong Kong shares ended 1.2 percent in the red, hit by lower energy prices and lack of fresh cues on the state of the global economy. The extended rally on the mainland Chinese market lifted China Life 0.3 percent on expectations of improved investment income in 2009.

Singapore's Straits Times Index was down 1.4 percent. Commodities firm Olam rose 2.6 percent after Merrill Lynch reinstated its coverage of the firm with a 'Buy' rating.

China's Shanghai Composite Index continued its upward march, rising 1.2 percent, despite news of Shanghai's first major IPO since last September. Chinese toll road operator Sichuan Expressway said it planned to raise as much as 2 billion yuan ($292.8 million) in a public share offering in Shanghai.