Asian markets down on European struggles
Asian markets mostly slipped on Wednesday following two days of gains as eurozone finance chiefs struggled to boost the financial firepower of a bailout fund for the debt-ridden region.
While they were unable to increase the European Financial Stability Facility’s war chest to the hoped-for one trillion euros ($1.3 trillion), they did give it new powers and called on help from the International Monetary Fund.
Tokyo ended 0.51 percent, or 43.21 points, lower at 8,434.61 and Seoul fell 0.49 percent, or 9.01 points, to 1,847.51.
Hong Kong slipped 1.46 percent, or 266.85 points, to 17,989.35 while Shanghai slumped 3.27 percent, or 78.98 points, to 2,333.41. The mainland Chinese market was weighed by disappointment that leaders had failed to ease monetary policy despite easing inflation and slowing economic growth.
But Sydney rose 0.43 percent, or 17.7 points, to close the day at 4,119.8.
The losses follow a two-day rally that was triggered by hopes European officials would be able to come up with a plan to avert the break-up of the eurozone.
While the talks on Tuesday failed to increase the EFSF from 440 billion euros, ministers did give it new weapons.
They agreed to allow the fund to guarantee 20-30 percent of potential losses incurred by investors who buy bonds of troubled governments. There was also a decision to create co-investment funds to allow public and private investors to participate.
“We agreed to rapidly explore an increase of the resources of the IMF through bilateral loans,” Jean-Claude Juncker, head of the region’s finance ministers said, adding that the goal would be to allow the IMF to match the firepower of the EFSF and cooperate more closely with it.
Ministers are turning to the IMF to circumvent a ban on the European Central Bank (ECB) providing direct aid to countries in trouble as Germany opposes letting it act as a lender of last resort.
However, some finance ministers suggested the ECB could play a bigger role in the crisis through the IMF by providing loans to the US-based fund, which would then give aid to eurozone nations.
There are hopes that a plan to provide Italy with a 400-billion-euro bailout – to help pay some of its two trillion euro debt – that would see the IMF provide a quarter with the rest coming from the ECB and stability fund.
“There is growing conviction that Italy may soon need to be bailed out,” a eurozone official with direct knowledge of the matter told Dow Jones Newswires.
The official said there were no official talks yet but they could start during or after a December 8-9 summit of European leaders.
On currency markets the euro was at $1.3298 and 103.72 yen in early European trade, compared with $1.3317 and 103.66 yen in New York late Tuesday.
The dollar was at 78.00 yen from 77.90 yen.
Adding to downward pressure on equities was news that Standard & Poor’s had downgraded its ratings on 15 global banks as part of an expected change in how it forms its opinions on financial institutions.
The move changes how S&P factors into ratings the level of government support, removing what it had seen as an assumption that countries would keep the big banks from failing.
New York’s main oil contract, light sweet crude for January delivery, fell 48 cents to $99.31 per barrel in the afternoon.
Brent North Sea crude for January was down 55 cents to $110.27.
Gold was trading at $1,705.75 an ounce at 0950 GMT, from $1,707.90 late Tuesday.
In other markets:
— Singapore closed up 0.53 percent, or 14.36 points, at 2,702.46.
Keppel Corp. gained 2.33 percent to Sg$9.21 and Sembcorp Industries rose 1.97 percent to Sg$4.15.
— Taipei fell 1.21 percent, or 84.53 points, to 6,904.12.
Leading smartphone maker HTC lost 3.44 percent at Tw$477.0 while Taiwan Cement was 2.54 percent lower at Tw$32.55.
— Wellington rose 0.95 percent, or 30.74 points, to to 3,270.21.
Telecom was up 2.0 percent to NZ$2.03, Fletcher Building added 0.7 percent at NZ$5.92 and Warehouse Group fell 0.3 percent to NZ$3.16.
— Kuala Lumpur was 1.90 percent, or 27.38 points, up at 1,472.10.
Budget carrier AirAsia climbed 0.82 percent to 3.69 ringgit, while financial firm CIMB Group Holdings increased 1.28 percent to 7.14 ringgit. Food trader JCY International lost 2.63 percent to 0.74 ringgit.
— Jakarta added 0.74 percent, or 28.31 points, to 3,715.08.
Indosat gained 4.9 percent to 5,350 rupiah, Telkom rose 2.8 percent to 7,350 rupiah and cigarette maker Garam ended up 3.8 percent at 65,000 rupiah.
— Bangkok rose 0.74 percent, or 7.27 points, to 955.33.
PTT gained 6.00 baht to 306.00, while Banpu lost 4.00 baht to 544.00.
— Mumbai rose 0.72 percent, or 115.12 points, at 16,123.46.
Bharti Airtel, the world’s fifth-largest mobile phone firm rose 3.17 percent to 385.3 rupees after the firm said it had acquired 50 million subscribers in Africa.
— Manila was closed for a public holiday.
