Asian stocks slump on fresh global economy fears
HONG KONG—Asian markets slumped on Wednesday as traders switched their attention from the US debt deal to the weakening global economic outlook and fears of fresh sovereign debt contagion in the eurozone.
Despite President Barack Obama’s signing off on the deal to raise the US debt ceiling and avoid a default, equities suffered a heavy sell-off and investors put their cash in safe haven gold, which surged to a record high.
Tokyo shed 2.11 percent, or 207.45 points, to 9,637.14 and Sydney tumbled 2.27 percent, or 100.8 points, to 4,332.8, while Seoul dived 2.59 percent, or 55.01 points, to 2,066.26.
Hong Kong fell 1.91 percent, or 428.74 points, to 21,992.72 but Shanghai ended flat, edging down 0.77 points to 2,678.49.
The red numbers in Asia followed similar losses on Wall Street, where markets fell for an eighth straight day, the longest losing streak since the beginning of the financial crisis in October 2008.
The Dow sank 2.19 percent, the S&P 500 dropped 2.56 percent and the tech-heavy Nasdaq shed 2.75 percent.
The Nasdaq and S&P 500 both closed below where they started the year, while the Dow is at its lowest since mid-March.
The losses continued in early European trade, with London’s FTSE 100 down 1.47 percent, Frankfurt’s DAX 30 off 1.16 percent and the Paris CAC 40 also 1.16 percent off.
Investors were unmoved by news that both Moody’s Investors Service and Fitch affirmed the US’s top-notch credit rating after the 11th-hour deal to avert a disastrous default by Washington.
As US default fears lifted, attention turned to the economic outlook. And traders were spooked, with a report showing US consumer spending declined in June, the first drop in nearly two years, suggesting the economy is stalling.
That followed results showing manufacturing virtually stationary in the US as well as across Europe and Asia.
However, bond markets were roiled by troubles in the eurozone.
In overnight trade, concern was focused on Italy and Spain with spreads between yields on their sovereign bonds and those of Germany hitting record levels, dampening hopes that the eurozone debt crisis might soon be over.
The premium demanded for buying Spanish 10-year bonds over safe-bet German bonds surged to more than four percentage points – 404 basis points – the highest since the introduction of the euro in 1999.
Investors sold down Spanish and Italian bonds on concerns that their debt problems would only get worse as economic growth slows.
The “market mood is likely to remain cautious on the back of the fear of US double dip recession and debt contagion in Europe,” said Credit Agricole in a note, according to Dow Jones Newswires.
On currency markets, the euro held up in early European trade after falling late in New York on Tuesday. The single unit was at $1.4267 in Tokyo from $1.4202 in New York, while it edged down to 109.49 yen against 109.51 yen.
The dollar was rangebound at 77.33 yen compared to 77.14 yen.
Risk aversion has sent the price of gold soaring and the precious metal closed at a record high of $1,668-$1,669 in Hong Kong Wednesday.
However, worries of a drop in demand hit oil. New York’s main contract, light sweet crude for September delivery eased 41 cents to $93.38 a barrel and Brent North Sea crude for September delivery sank 33 cents to $116.13.
In other markets:
— Singapore closed 1.47 percent, or 46.75 points, lower at 3,130.34.
Singapore Airlines sank 2.7 percent to Sg$12.24 and Keppel Corp. was 1.46 percent lower at Sg$10.84.
— Taipei fell 1.49 percent, or 127.86 points, to 8,456.86.
Leading smartphone maker HTC shed 3.01 percent to end at Tw$871.0 while Taiwan Semiconductor Manufacturing Co was 1.82 percent lower at Tw$70.1.
— Manila fell 1.16 percent, or 52.78 points, to 4,488.45.
Energy Development fell 0.7 percent to 6.66 pesos, while Atlas Consolidated Mining shed 5.3 percent to 22.50 pesos and property developer Megaworld ended down 4.1 percent at 2.08 pesos.
— Wellington closed down 0.59 percent, or 20.18 points, at 3,369.82.
Air New Zealand slumped 1.7 percent to NZ$1.16, Telecom slipped 0.6 percent to NZ$2.66 and retailer Warehouse Group fell 1.4 percent to NZ$3.52.
— Kuala Lumpur ended down 0.63 percent, or 9.75 points, at 1,545.10.
MISC lost 2.3 percent to 7.38 ringgit, Axiata Group shed 0.6 percent to 5.07 ringgit and Telekom Malaysia gained 0.2 percent to 4.06 ringgit.
— Jakarta fell 0.99 percent, or 41.35 points, to 4,136.50.
Bank Mandiri shed 3.2 percent to 7,650 rupiah, while gas distributor Gas Negara lost 4.4 percent to 3,825 rupiah.
— Bangkok fell 0.54 percent, or 6.15 points, to 1,133.46.
Banpu lost 4 baht to 728, while PTT lost 5 baht to 343.
— Mumbai slid 0.94 percent, or 169.34 points, to 17,940.55, a six-week low, with analysts predicting the negative trend could continue.
Engineering firm Larsen and Toubro fell 4.33 percent or 75 rupees to 1658.7 and leading vehicle maker Tata Motors slid 3.0 percent or 28.65 rupees to 927.7.
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