Asian shares skid, US dollar struggles to keep traction on disappointing data

A pedestrian walks past an electronic stock display at a security company's window in Tokyo, Feb 4, 2014. Japan's Nikkei index closed down 4.18 per cent at 14,008.47 points. -- PHOTO: AGENCE FRANCE-PRESSE
A pedestrian walks past an electronic stock display at a security company's window in Tokyo, Feb 4, 2014. Japan's Nikkei index closed down 4.18 per cent at 14,008.47 points. -- PHOTO: AGENCE FRANCE-PRESSE

TOKYO (REUTERS) - Asian shares skidded while the US dollar struggled to keep its footing, after disappointing data cast doubt on the strength of the United States economy and gave investors little reason to hope for stability in emerging markets after their recent rout.

"The bears have a seemingly easy target within reach and the remaining bulls will want to get out of the way, so talk of a correction looks to be turning into a self-fulfilling prophecy," Mr Jonathan Sudaria, a dealer at Capital Spreads in London, said.

Hong Kong shares sank 2.89 per cent, catching up with plunges elsewhere. Mainland Chinese markets remained shut for the Chinese New Year holiday and would reopen on Friday. Japan's Nikkei stock average, meanwhile, ended down 4.2 per cent in the highest volume since June, marking its worst day since that month.

"Experienced emerging market investors would be looking at this selldown with great interest, looking to pick up quality names on the dip, but they are still in the minority for now,"said Mr Erwin Sanft, Standard Chartered's Hong Kong-based China equity strategist.

The sharp drop in the Nikkei came even after the Bank of Japan bought 123 billion yen (S$1.5 billion) worth of exchange traded funds this year as of Feb 3 to support the equities market.

Data showing US manufacturing activity slowed sharply last month dealt a heavy blow to markets already worried that the US Federal Reserve's decision to taper its asset purchases would lead to capital flight from emerging markets.

January's sharp fall in US output came on the back of the biggest drop in new orders in 33 years, while construction spending barely rose in December, suggesting the US economic recovery is more tenuous than some investors had believed.

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