Asian shares slip as Fed worries trump US budget deal

An investor looks at the stock price monitor at a private securities company in Shanghai, China, Wednesday, Dec. 11, 2013. Asian stocks were mostly down Wednesday as investors factored in the prospect of the Federal Reserve reducing its lavish monetary stimulus this month. AP PHOTO

HONG KONG—Asian markets fell Wednesday as fears that the Federal Reserve will soon wind down its stimulus program overshadowed a US budget deal to avoid a repeat of the October government shutdown.

The dollar retreated against the yen after approaching highs not seen for five years, while the euro continued to receive support from the European Central Bank’s decision last week to delay cutting interest rates further.

Tokyo slipped 0.62 percent, or 96.25 points, to 15,515.06, Sydney fell 0.77 percent, or 39.4 points, to 5,104.2 and Seoul ended 0.78 percent, or 15.48 points, lower at 1,977.97.

Hong Kong closed 1.71 percent lower, giving up 405.95 points to 23,338.24, while Shanghai ended down 1.49 percent, or 33.32 points, at 2,204.17.

The two bourses fell a day before China’s four state-owned banks and a former state policy bank issue a total of 19 billion yuan ($3.1 billion) of negotiable certificates of deposit, whose interest rate is linked to a market figure set between the trading parties.

The move is the latest step in China’s drive to interest rate liberalization but has led to investor fears about the banks’ short-term profitability.

Congressional negotiators on Tuesday reached a two-year deal on spending which President Barack Obama hailed as a sign of rare bipartisan cooperation in the strife-filled legislature.

Under an agreement in October that ended a crippling 16-day shutdown, US federal spending authority expires on Jan. 15, when a new agreement would need to be in force.

Tuesday’s deal sets the new annual budget caps for 2014 and 2015 at just over $1 trillion—slightly higher than current levels—and at least partially repeals the automatic and widely loathed budget cuts known as “sequestration”.

By most accounts the agreement is an underwhelming one, far from the grand bargain envisioned by some optimists in Washington earlier this year.

But it sets the warring Democratic and Republican Parties on track for further cooperation on fiscal policy, ending the cycle of budget feuding that has marred Washington since 2011.

On Wall Street, which closed before news of the budget deal, the Dow fell 0.33 percent, the S&P 500 shed 0.32 percent and the Nasdaq lost 0.20 percent.

While the news out of Washington was positive, traders are keeping a close eye on next week’s Fed policy meeting to see if it announces a cut in its stimulus program.

Expectations it will start to whittle down the $85 billion a month bond-buying scheme were fueled Monday when St. Louis Fed President James Bullard said a marginal reduction could be on the cards after strong jobs and growth data at the end of last week.

That boosted the dollar, which rose to 130.30 yen on Tuesday, closing in on highs not seen since 2008. But it eased on Wednesday on hints of only a slight taper of the stimulus.

The dollar fetched 102.53 yen in afternoon Asian trade, from 102.81 yen in New York and well down from 103.30 yen in Tokyo earlier Tuesday.

The euro bought $1.3747 and 141.00 yen, compared with $1.3760 and 141.68 yen in US trade.

On oil markets, New York’s main contract, West Texas Intermediate for January delivery, was down one cent at $98.50 in afternoon Asian trade. Brent North Sea crude for January rose one cent to $109.39.

Gold fetched $1,256.40 at 0820 GMT compared with $1,247.49 late Tuesday.

In other markets:

— Taipei fell 0.11 percent, or 9.62 points, to 8,433.77.

Taiwan Semiconductor Manufacturing Co. rose 0.96 percent to Tw$105.0 while smartphone maker HTC slipped 3.39 percent to Tw$142.5.

— Wellington was flat, edging down 2.20 points, or 0.05 percent, to 4,704.30.

Fonterra Shareholders Fund was off 5.74 percent at NZ$5.75 and Air New Zealand rose 1.23 percent to NZ$1.64.

— Manila was flat, edging up 2.34 points to 5,888.74.

Philippine Long Distance Telephone rose 22 pesos to 2,644 pesos and BDO Unibank dropped 0.86 percent to 69.35 pesos, while Metropolitan Bank was 1.50 percent lower at 72.10 pesos.

— Singapore closed down 0.68 percent, or 20.98 points, at 3,060.74.

DBS Bank eased 1.08 percent to Sg$16.56 while oil rig maker Keppel Corp. was down 0.18 percent at Sg$10.88.

— Jakarta ended flat, dipping 3.94 points to 4,271.74.

Hero Supermarket lost 2.02 percent to end at 2,425 rupiah, while Indah Kiat Pulp and Paper rose 0.67 percent to 1,500 rupiah.

— Bangkok rose 0.14 percent, or 1.93 points, to 1,369.35.

Coal producer Banpu rose 3.20 percent to 32.25 baht, while energy firm PTT fell 0.98 points to 302 baht.

— Kuala Lumpur was slightly lower, giving up 1.03 points to 1,842.82.

Felda Global Ventures Holdings fell 2.4 percent to 4.50 ringgit, while plantation company IOI slipped 2.2 percent to 5.80 ringgit. Utility Tenaga Nasional was up 2.5 percent at 11.30 ringgit.

— Mumbai fel 0.39 percent, or 83.85 points, to 21,171.41.

Tata Motors fell 3.25 percent to 377.8 rupees while Oriental Bank fell 4.03 percent to 215.6 rupees.—Anuj Chopra

Originally posted at 11:36 am | Wednesday, December 11, 2013