Dollar strengthens after gloomy data from China

Grim trade deficit report from Australia aggravates pessimism

TOKYO—The dollar firmed while most riskier assets fell on Wednesday as data from China and Australia deepened gloom about the global economic outlook, further reducing risk appetite already hurt by uncertainty about the timing of Spain’s request for a bailout.

US stock futures eased 0.2 percent, suggesting a weak start on Wall Street, while financial spreadbetters expect European bourses to open mixed.

Demand for the safe-haven dollar pushed the index measuring the dollar against a bas- ket of six major currencies up 0.1 percent, and lifted the greenback to a 1-1/2 week high of 78.31 yen.

The euro eased 0.2 percent to $1.2896. It has come off a three-week low of $1.28035 touched on Monday but is drifting away from a 4-1/2 month high of $1.31729 seen in midSeptember.

In Australia, the nation’s trade deficit blew out to its widest in 31/2 years in August, weighing on the local currency and paring gains for equities. Falling prices for iron ore and coal on weak demand from China have eroded export earnings.

China’s official purchasing managers’ index for the services sector fell to 53.7 in September from 56.3 in August as growth in the country’s manufacturing industry stabilized at a slower pace, putting the world’s second-largest economy on course for a seventh straight quarter of slowdown.

“It’s hard to get bullish when the numbers are so bad, especially in China and the euro zone,” said Tony Nunan, an oil risk manager at Mitsubishi Corp., referring to weak manufacturing data released this week.

The Asian Development Bank also cut most of its 2012 and 2013 growth estimates for developing Asia on Wednesday, citing the impact of the slump in global demand on China and India.

The MSCI index of Asia-Pacif- ic shares outside Japan was down 0.2 percent while Japan’s Nikkei average finished down 0.5 percent.

Hong Kong’s Hang Seng index, which resumed trading after a holiday weekend, climbed 0.2 percent. Markets in China and South Korea are closed for holidays on Wednesday.

Analysts say markets nevertheless have become more resilient since last month after the US Federal Reserve launched an aggressive stimulus package and the European Central Bank announced a program to buy bonds of euro zone states which ask for assistance.

“Ever since these steps are taken, tail risks receded, market sentiment improved and market reactions to negative news became less acute than before,” said Junya Tanase, chief FX strategist at JPMorgan in Tokyo.

“But there is no trend emerging as markets have not had a convincing assessment about risk for months,” he said.