Asian shares, oil higher but worries about growth linger

Soft US economic data and mixed US earnings results further undermine investor sentiment

Asian shares and oil prices climbed on Friday but investors remained cautious after a volatile week that began with a broad sharp sell-off, as more soft US economic data and mixed US earnings results sustained worries over global growth.

The MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.6% after falling 0.6% the previous session. The index was on trace for a weekly loss of 0.8%.

Chinese shares were the regional outperformers, with a 1.4% gain in Shanghai stocks and a 0.9% rise in Hong Kong shares.

Australian shares were flat as mining stocks rebounded on short-covering after the recent heavy selling in commodities paused. The Australian dollar edged up 0.2% to $1.0320.

"Today it's just a bit of short-covering on those stocks," said City Index market analyst Jonathan Preston of Australian shares. "The miners have really had a tough time on the back of falling commodities."

Oil and gold recovered overnight but remained vulnerable.

Spot gold was up 0.3% to $1,394.46, rebounding after falling nearly 3% in Asian trade on Thursday and from its lowest in more than two years of $1,321.35, touched on Tuesday.

Brent crude oil rose 0.3% to $99.46 a barrel after dipping below $100 to a low of $96.75 on Thursday, its lowest since early July. US crude rose 0.6% at $88.21, off a 2013 low of $85.61 hit on Thursday.

Funds pulled from commodities

Investors in US-based funds pulled a record $2.7 billion out of commodities and precious metals funds in the week ending April 17, raising a red flag over the global economy's growth prospects. The data from Thomson Reuters Lipper service also showed on Thursday that Japanese stock funds attracted a record $1.67 billion.

The Standard & Poor's 500 Index broke under its 50-day moving average for the first time this year, signalling a possible reversal in the market's uptrend to a record peak earlier this month. The S&P 500 is set to post its worst week since June 2012, although it remains up 8.1% for 2013.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits rose last week and factory activity in the nation's Mid-Atlantic region cooled in April.

Japan's Nikkei average gained 0.7% as the yen's resumed decline helped improve sentiment.

The dollar rose 0.5% to 98.63 yen as traders believed a meeting of the Group of 20 countries which began on Thursday in Washington would show understanding that the weak yen trend stems from Japan's aggressive monetary easing aimed at beating stubborn deflation, and not simply competitive devaluation.

Japan did not face opposition to its aggressive monetary easing at the first day of the two-day G20 meeting, Finance Minister Taro Aso said on Thursday.

"The dollar's long-term uptrend against the yen remains intact, but overall the US currency's direction is not clear as the recent softer economic indicators have clouded the prospect of the Federal Reserve shifting its current stimulus framework," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.

Euro stays vulnerable

The euro, on the other hand, clearly was vulnerable and may face downward pressures next week if a batch of end-month economic reports due then showed weakness in economic activities in the euro zone, Sera said.

The single currency also faces political risks, with Italy's parliament failing to elect a new state president in its first vote on Thursday, raising concerns that the lack of a government would delay fiscal reforms and undermine the economy.

The euro was resilient, holding steady around $1.3063.

Morgan Stanley said in a research note that while weak global growth signals and commodity prices suggest continued testing times over the next couple of months, the liquidity being pumped into markets by central banks will continue to lend support.

"We expect the current pause in currency market trends to be temporary, providing renewed opportunities to establish bullish positions in many of the pro-cyclical currencies," it said.