Asian shares mixed, German bond auction weighs

HONG KONG—Asian shares were mixed on Thursday as fears about Europe’s debt crisis deepened after Germany, considered the pillar of the eurozone, failed to sell all its bonds in an auction.

While some markets managed to eke out small gains thanks to bargain-buying, the ongoing woes in Europe as well as the slowing global economy pushed investors to the sidelines.

Tokyo fell 1.80 percent, or 149.56 points, to 8,165.18 as it played catch-up with regional losses on Wednesday, when it was closed for a public holiday.

Sydney slipped 0.17 percent, or 6.8 points, to 4,044.2.

But Hong Kong gained 0.40 percent, or 70.67 points, to 17,935.10 and Seoul closed 0.67 percent, or 11.96 points, higher at 1,795.06 while Shanghai was up 0.10 percent, or 2.48 points, at 2,397.55.

A German government bond auction Wednesday drew some of the weakest demand since the introduction of the euro, signaling diminishing investor appetite even for the safest eurozone assets.

German bonds are considered the gold standard of eurozone debt.

Berlin only managed to draw bids of 3.9 billion euros for its six-billion-euro 10-year bond auction, indicating that investors are now skeptical about even the safest assets in the eurozone.

The failure comes days after Moody’s warned that France’s weak growth and exposure to European debt could see it lose its cherished AAA debt rating, which would send its borrowing costs soaring.

“It’s OK as long as money is floating from bad assets to good ones, but now investment money itself is shrinking,” Kenichi Hirano, operating officer at Tachibana Securities, told Dow Jones Newswires.

Austria’s central bank head and European Central Bank (ECB) governing council member Ewald Nowotny called it an “alarm signal,” but the German Finance Agency said it was a “reflection of the extraordinarily nervous market conditions.”

A spokesman insisted it does not mean any refinancing bottleneck.

With bond yields for Spain and Italy sitting close to the seven percent level considered too high for governments to service their debts, there are fears that the eurozone project could unravel and the global economy suffer another meltdown.

“There was a substantial collapse in the euro after the German auction, and it looks like the global economy is going down while the core of Europe is also facing problems,” said Thomas Harr, head of Asian FX strategy at Standard Chartered.

However, the euro managed to hold off from any further fall after tumbling in New York late Wednesday in the wake of the German auction failure.

The common currency bought $1.3395 compared with $1.3347 late Wednesday in New York, where it plunged from $1.3507. It also fetched 103.33 yen from 103.15 yen. The dollar was at 77.13 yen, down from 77.29 in New York.

Compounding Europe’s troubles was data Wednesday showing manufacturing in China’s huge economy had slumped in November, while Washington said US growth was not as fast as first thought in the third quarter.

Financial stocks were under pressure after the US Federal Reserve said earlier this week it will stress-test 31 major US banks next year, raising fears they will need to keep more cash in reserve, further squeezing liquidity.

The leaders of Germany, France and Italy – the eurozone’s three-largest economies – are due to meet Thursday to find a way to calm the troubled bloc’s bond markets.

On oil markets New York’s main contract for January delivery gained 24 cents to $96.41 per barrel while Brent North Sea crude for delivery in January advanced 60 cents to $107.62.

Gold was trading at $1,698.30 an ounce by 1040 GMT, from $1,695.15 late Wednesday.

In other markets:

— Singapore closed flat, edging up 0.58 points to 2,677.15.

Wilmar International fell 1.37 percent to Sg$5.06 and City Developments sank 2.40 percent to Sg$9.36.

— Taipei gained 0.85 percent, or 57.96 points, to end at 6,864.39.

Hon Hai rose 1.06 percent to Tw$76.0 while Taiwan Semiconductor Manufacturing Co. was 0.82 percent lower at Tw$72.8.

— Manila closed 0.79 percent, or 33.94 points, lower at 4,237.65.

Megaworld led the retreat, dropping 4.23 percent to 1.81 pesos and Lepanto Consolidated Mining’s “A” shares fell 2.63 percent to 1.48 pesos, while Metropolitan Bank eased 3.05 percent to 66.70 pesos.

— Wellington fell 0.84 percent, or 27.57 points, to 3,241.10.

Telecom network provider Chorus, which listed Wednesday, rose 2.8 percent to NZ$3.30, while its former parent Telecom Corp was down 1.0 percent at NZ$2.01 and Fletcher Building slipped 0.3 percent to NZ$5.90.

— Kuala Lumpur shares gained 1.03 percent, or 14.92 points, to 1,447.99.

Financial firm CIMB Group Holdings added 1.65 percent to 6.79 ringgit, while UOA Development rose 2.90 percent to 1.42 ringgit. Petronas Chemicals Group lost 0.17 percent to 5.92 ringgit.

— Jakarta closed 0.24 percent, or 9.02 points, higher at 3,696.03.

Bank Mandiri added 0.8 percent to 6,700 rupiah, car maker Astra gained 2.1 percent to 69,400 rupiah and coal producer Bumi ended up 2.5 percent at 2,075 rupiah.

— Bangkok ended 0.37 percent, or 3.63 points, up at 980.50.

— Mumbai was 1.01 percent, or 158.52 points, higher at 15,858.49.