This is due to IFS (Internal Field Separator) variable which contains newline.
$ cat xx1
1
2
$ A=`cat xx1`
$ echo $A
1 2
$ echo "|$IFS|"
|
|
A workaround is to reset IFS to not contain the newline, temporarily:
$ IFSBAK=$IFS
$ IFS=" "
$ A=`cat xx1` # Can use $() as well
$ echo $A
1
2
$ IFS=$IFSBAK
To REVERT this horrible change for IFS:
IFS=$IFSBAK