Asian stocks dive as fears outweigh debt vote
HONG KONG—Asian markets tumbled on Tuesday as news that US lawmakers had voted in favor of a plan to avoid default was overshadowed by fears about the global economy and a possible American credit rating downgrade.
In Tokyo, expectations that officials could soon step into the currency markets were raised when Japan’s finance minister said the yen was “strongly overvalued” after the unit approached its record high against the dollar in New York trade a day earlier.
Tokyo shed 1.21 percent, or 120.42 points, to 9,844.59 and Seoul slumped 2.35 percent, or 51.04 points, to 2,121.27.
Sydney ended 1.43 percent, or 64.2 points, off at 4,433.6.
Shanghai fell 0.91 percent, or 24.52 points, to 2,679.26 while Hong Kong lost 1.07 percent, or 241.91 points, to 22,421.46.
The losses came a day after a rally on news that an eleventh-hour deal had been struck between the White House and party leaders to raise the country’s debt ceiling and avoid a catastrophic default on US sovereign debt.
On Monday the House of Representatives voted in favor of the deal and it must now go to the Democrat-led Senate, where it is also expected to pass.
However, despite the news – which ended months of bickering – dealers turned their attention to the possibility that the AAA credit rating the US enjoys could be downgraded for the first time ever.
Such a move would push up US interest rates, making debt payments more expensive and hitting the already spluttering US economy, still grappling with historically high unemployment of 9.2 percent.
Adding to traders’ woes was a raft of weak figures from the United States and other major economies.
Earlier Monday the US said manufacturing slowed to a near standstill in July, days after it announced the economy grew only 1.3 percent in the second quarter, after 0.4 percent in the first – the weakest growth since it exited recession two years ago.
The imminent end to the US debt saga “lifts an overhang on global markets but we think deteriorating growth outlook is the bigger overhang,” ING Financial said in a note to clients, according to Dow Jones Newswires.
China, an economy on which many other nations rely to drive growth, also slowed abruptly – with one survey suggesting contraction – while there was similar bad news in Australia, Taiwan and India.
The poor economic figures hit Wall Street, which closed before the debt vote. The Dow shed 0.09 percent, the S&P 500 dropped 0.41 percent and the Nasdaq dropped 0.43 percent.
Eyes are also on the key release Friday of US jobs figures, which will provide another snapshot of the state of the economy.
On currency markets the dollar fell briefly to 76.29 yen in New York on Monday – near its post-World War II low of 76.25 yen, reached on March 17 in the wake of the Japanese earthquake and tsunami. It ended in New York at 77.16 yen.
The yen’s surge then prompted a joint intervention by Japan and other members of the Group of Seven.
The greenback firmed in Tokyo and was at 77.36 yen in early European trade.
However, Japanese authorities remain ready to step in at any point, a person familiar with the country’s currency policy told Dow Jones Newswires.
“Japan can conduct intervention at any time,” the source told the wire.
But the source declined to say how close the authorities were to taking action.
The euro fell to $1.4216 from $1.4248, and was at 109.96 yen from 109.98 yen.
New York’s main contract, light sweet crude for September delivery, slipped 27 cents to $94.62 a barrel in the afternoon.
Brent North Sea crude for delivery in September fell 37 cents to $116.44.
Gold closed in Hong Kong at $1,627.50-$1,628.50 an ounce, up from Monday’s finish of $1,615.00-$1,616.00.
In other markets:
— Singapore closed down 1.19 percent, or 38.18 points, at 3,177.09.
Singapore Airlines plunged 12.15 percent to Sg$12.58 and Sembcorp Industries shed 0.98 percent to Sg$5.08.
— Taipei closed 1.34 percent, or 116.66 points, lower at 8,584.72.
Formosa Plastics Corp. lost 7.0 percent to Tw94.0 while Taiwan Semiconductor Manufacturing Co. was 1.65 percent lower at Tw$71.4.
— Manila closed 0.64 percent, or 29.30 points, lower at 4,521.23.
Metropolitan Bank fell 0.2 percent to 78.85 pesos, Alliance Global gained 0.8 percent to 12.10 pesos and Energy Development shed 1.6 percent to 6.71.
— Wellington closed 0.49 percent, or 16.84 points, off at 3,397.00.
Telecom rose 1.3 percent to NZ$2.68 while Mainfreight fell 1.1 percent to NZ$10.60 and Fletcher Building ended 2.6 percent down at NZ$8.02.
— Kuala Lumpur ended down 0.20 percent, or 3.16 points, at 1,554.85.
Maxis shed 0.2 percent to 5.47 ringgit, PPB Group lost 1.7 percent to 17.28 ringgit and CIMB Group eased 0.4 percent to 8.39.
Salcon added 2.8 percent to 0.555 ringgit and Mah Sing gained 1.7 percent to 2.44.
— Jakarta fell 0.37 percent, or 15.60 points, to 4,177.85.
Car maker Astra fell 0.6 percent to 71,200 rupiah, Bank Negara slid 3.3 percent to 4,425 rupiah and coal producer Bumi Resources rose 3.2 percent to 3,225 rupiah.
— Bangkok fell 0.40 percent, or 4.53 points, to 1,139.61.
Siam Cement lost 7 baht to 377, while PTT fell 2 baht to 348.
— Mumbai fell 1.12 percent, or 204.44 points, to 18,109.99.
India’s second biggest mobile phone firm Reliance Communications fell 3.46 percent or 3.55 rupees to 98.95 and the country’s largest commercial bank State Bank of India fell 2.88 percent or 67.45 rupees to 2,276.8.
