GLOBAL MARKETS
Asian stocks sag on economic uncertainty, sky-high prices
By Louise Heavens
Reuters
First Posted 11:20:00 05/12/2008
SINGAPORE -- Stocks fell Monday, weighed down by uncertainty over the health of the US economy and surging oil and commodity prices, while Japanese exporters felt the pinch from a stronger yen.
The dollar held steady but remained on the defensive after a sharp fall Friday following news that American International Group, the world's biggest insurer, posted its largest ever quarterly loss and said it planned to raise $12.5 billion in fresh capital.
The announcement and crude oil's record high above $126.00 a barrel, heightened concern about the health of the US economy, and sent the Dow Jones industrial average down 0.9 percent.
AIG's huge loss pressured the region's banks and financial stocks, including Japan's Mitsubishi UFJ Financial Group.
Tokyo's market was also dragged lower by weaker exporters, such as Canon Inc., as strength in the yen, which rose last week by more than 2.0 percent against the dollar, threatened to eat into profits.
The Nikkei dropped 0.2 percent by its midsession break.
"The market's weak moves could be a signal that the rebound from March 17 (when the Nikkei hit a recent bottom) is at its peak around here," said Kenichi Hirano, operating officer at Tachibana Securities.
"With the Nikkei average's price-earnings ratio over 16, it's hard to expect it to go up further," he said.
Shares across the rest of Asia were steady by 0202 GMT. The benchmark is down just more than 8.0 percent so far this year, but had rallied sharply in March after it had fallen to its worst level since August 2007 with the collapse of US investment bank Bear Stearns.
Singapore's main index shed 0.2 percent and Taiwan's index edged lower, but Australia's benchmark rose 0.6 percent, lifted by news that Westpac Banking Corp. Ltd. was in talks on an all-share bid for St George Bank Ltd., which has a market value of A$15 billion ($14 billion).
Markets in Seoul and Hong Kong were closed for a public holiday.
DOLLAR FLOOR
The dollar was steady against major currencies after its fall late last week as investors waited for more clues on the policy outlooks for the Federal Reserve and European Central Bank, while eyeing the relentless rise in oil prices.
"It will take time for markets to make conclusions about the relative monetary policy outlooks," said Tomoko Fujii, head of Japan economics and strategy at Bank of America.
"It is not easy to draw conclusions about whether the Fed is really done or not."
The dollar fetched 102.98 yen, up 0.2 percent from US trade late last week. The euro bought $1.5445, down slightly from $1.5481 Friday.
A long-term slide in the dollar has helped fuel a surge in the cost of raw materials, which are mainly priced in the US currency, with everything from oil to corn and copper hitting historic highs.
Crude oil rose Monday to $126.14 a barrel, holding close to a record high of $126.27 hit on Friday.
Middle East violence is the latest factor to raise concerns about potential supply disruptions from the world's largest crude producing region.
Spot gold changed hands at $884.95/$885.95 an ounce, little changed from late trading levels in New York Friday.
Japan's June 10-year futures slipped 0.24 point to 136.36. The benchmark 10-year yield rose two basis points to 1.575 percent.
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