Asian shares tumble on Greece fears
HONG KONG—Asian stock markets slumped while the euro dived to a 10-year low against the yen on Monday as concerns grew that Greece would default on its debt repayments.
Big losses in Europe and on Wall Street on Friday fueled the selling pressure, while the resignation of a key European Central Bank committee member also depressed sentiment.
Tokyo fell 2.31 percent, or 201.99 points, to a 29-month-low of 8,535.67, with exporters again feeling the most pain as the euro sank against the yen. After the closing bell, Toyota’s credit rating was cut by Fitch, which blamed the strong yen.
The euro hit 104 yen in Tokyo trade, its lowest level since mid-2001, compared with 107.66 yen on Friday. It also fell to $1.3560 from $1.3649 Friday. The dollar was lower at 76.80 yen against 77.58 yen.
The euro’s weakness also weighed on other markets, with Hong Kong tumbling 4.21 percent, or 836.09 points, to 19,030.54, and Sydney ending 3.72 percent, or 156.2 points, lower at 4,038.5.
Singapore ended 2.89 percent, or 81.52 points, lower at 2,743.58.
Seoul, Shanghai and Taipei were closed for public holidays.
Greece – which earlier this year was given the green light for a second bailout – on Sunday announced two billion euros in budget cuts demanded by the EU and the IMF for its rescue package to avoid a default.
EU economy commissioner Olli Rehn welcomed the move and said a team would head to Athens in the next few days to discuss a new tranche of Greece’s first rescue package agreed in 2010.
However, European finance ministers are split over how to deal with obstacles holding up the second 160-billion-euro bailout for Greece, agreed in principle in July.
And Germany’s Economy Minister Philipp Roesler pointedly said in a column that Europe could no longer rule out an “orderly default” for Greece.
On Saturday, Der Spiegel magazine reported that the German government was preparing two contingency plans in the event of a Greek default.
Adding to the eurozone crisis was the resignation of Germany’s European Central Bank executive committee member Juergen Stark, who was against the bank buying the bonds of under-pressure countries.
Bank watchers suggested his exit showed the ECB was deeply split over its approach to handling the sovereign debt crisis.
“It’s very clear to us that this situation in Europe is not going to end well and the now plummeting euro is trying to tell you that some sort of Greek default and subsequent European bank recapitalization program is imminent,” said Bell Potter managing director Charlie Aitken in Sydney.
Satoshi Tate, a senior dealer at Mizuho Corporate Bank, told Dow Jones Newswires: “We are watching Greece, and only Greece.
“Conditions are getting very serious and everyone is worried how the issue will unfold.”
The strength of the yen – which is also sitting at near-record highs against the dollar – saw rating agency Fitch downgrade car giant Toyota because of its huge exposure to foreign exchange movements.
US stocks plunged Friday after Stark’s resignation. The Dow fell 2.69 percent, the S&P 500 fell 2.67 percent and the Nasdaq shed 2.42 percent.
European markets also tumbled Monday. In morning trade London’s benchmark FTSE 100 slumped 2.72 percent, Frankfurt’s DAX 30 index shed 3.55 percent and in Paris the CAC 40 was hammered, falling 4.81 percent.
A meeting Friday of the Group of Seven finance chiefs ended without any concrete conclusions, which also dampened sentiment, said dealers.
“The G7 didn’t seem to comfort the market by noting that they will take all the necessary steps to ensure resilience in the financial markets,” noted Emma Lawson of National Australia Bank.
Oil also suffered heavy selling. New York’s main contract, light sweet crude for delivery in October, dived $1.71 to $85.53 per barrel in the afternoon.
Brent North Sea crude for October delivery fell $1.17 to $111.60.
Gold was trading at $1,841.20 an ounce at 0800 GMT on Monday, down from $1,874.40 in late trade Friday.
In other markets:
— Manila ended 1.15 percent, or 50.02 points, lower at 4,296.05.
SM Investments fell 0.5 percent to 550 pesos, geothermal power producer Energy Development slid 0.8 percent to 6.10 pesos and Philippine Long Distance Telephone dropped 1.3 percent to 2,354.
— Wellington closed 1.81 percent, or 60.12 points, lower at 3,263.81.
Fletcher Building dived 2.9 percent to NZ$7.65, Contact Energy slumped 3.1 percent to NZ$5.25 and Sky Network Television shed 2.6 percent to NZ$5.36.
But New Zealand Oil & Gas soared 4.4 percent to NZ$0.71.
— Jakarta fell 2.56 percent, or 102.38 points, to 3,896.12.
Telkom shed 2.6 percent to 7,400 rupiah and Bank Mandiri dropped 4.2 percent to 6,900 rupiah.
— Kuala Lumpur fell 1.56 percent, or 22.86 points, to 1,446.26.
Petronas Chemicals declined 2.5 percent to 6.25 ringgit and financial firm CIMB Group lost 1.4 percent to 7.06. Malaysia Airports gained 0.2 percent to 6.30 ringgit.
— Bangkok fell 2.03 percent, or 21.54 points, to 1,040.83.
— Indian shares slid 2.17 percent, or 365.23 points, to 16,501.74.
Local sentiment weakened after India’s industrial output grew just 3.3 percent year-on-year in July, its slowest in nearly two years, indicating a wider malaise in Asia’s third-largest economy.
Leading private aluminium producer Hindalco slid for the second straight day, down 4.76 percent, or 7.15 rupees, to 143.1, while engineering giant Larsen and Toubro fell 2.64 percent to 1,645.4.
