Asian shares slip on S&P eurozone warning

HONG KONG—Asian markets fell in cautious trade Tuesday as a Standard & Poor’s warning of a possible downgrade for the eurozone offset news that France and Germany had outlined a plan to save the single currency.

The decision by S&P came as European leaders prepared for a two-day summit considered crucial for the future of the eurozone, whose debt crisis has sent global markets into turmoil.

BBY senior institutional trader Peter Copeland said the market was anticipating positive political leadership over the crisis, but added: “The S&P move is a reminder that it’s not all over.”

Tokyo gave up 1.39 percent, or 120.82 points, to 8,575.16 and Seoul lost 1.04 percent, or 20.08 points, to end at 1,902.82.

Sydney closed 1.48 percent, or 64.1 points, lower at 4,257.2 after Australia’s central bank cut interest rates and warned of headwinds in the global economy.

Hong Kong fell 1.24 percent, or 237.46 points, to 18,942.23 and Shanghai lost 0.31 percent, or 7.32 points, to 2,325.91.

S&P said on Monday it had put the ratings of 15 of the 17 eurozone countries, including Germany and France, on negative watch.

The summit was “an opportunity for policymakers to break the pattern of what we consider to have been defensive and piecemeal measures to date… and advance a credible response to the crisis that would go far towards restoring investor confidence,” it said.

“If the response of policymakers is not viewed by investors as robust, we believe market confidence could take another, possibly steep, drop downwards” that could force the downgrade, it said.

A review of ratings would be completed “as soon as possible” following the Brussels summit on Thursday and Friday.

S&P’s surprise announcement came just hours after German Chancellor Angela Merkel and French President Nicolas Sarkozy thrashed out strict new rules for fiscal discipline within Europe, which they hope will finally end the region’s woes.

The new rules would be enshrined in a rewritten EU Treaty signed by all 27 EU members or, as an alternative, by just the 17 eurozone members with the other nations signing on a voluntary basis.

Markets in Europe – which closed before S&P’s move – rose on the plan while Italian bond rates fell below the 6.0 percent threshold for the first time since the end of October. Rates also dropped on Spanish and French bonds.

An early rally on Wall Street was pared by the ratings warning. The Dow ended up 0.65 percent, the tech-heavy Nasdaq added 1.10 percent and the broader S&P 500 added 1.03 percent.

On currency markets the euro fetched $1.3374 and 104.02 yen in early European trade, compared with $1.3394 and 104.27 yen in New York late Monday.

The dollar was down slightly at 77.75 yen, against 77.83 yen.

The Australian dollar fell at one point to US$1.0180 Tuesday from US$1.0215 Monday after the Reserve Bank of Australia cut interest rates by 25 basis points for the second straight month and warned of pressure from a slowing global economy. But in later trade it recovered slightly to sit at US$1.0202.

While the rate cut would be welcomed ahead of Christmas, bank chief Glenn Stevens said there was a likelihood of further pressure on world growth caused by tighter credit conditions.

Meanwhile, the Asian Development Bank trimmed its 2012 growth projections for emerging East Asian economies, including China, from 7.5 percent to 7.2 because of the continuing eurozone uncertainties.

It said “major downside risks” included a deep recession in Europe and the United States, higher protectionism and persistent inflation.

New York’s main oil contract, light sweet crude for January delivery, fell 21 cents to $100.78 a barrel in the afternoon.

Brent North Sea crude for January shed 30 cents to $109.51.

Gold was trading at $1,721.50 an ounce at 0915 GMT, from $1,744.88 late Monday.

In other markets:

— Singapore lost 0.61 percent, or 16.99 points, to close at 2,749.24.

Olam International fell 2.08 percent to Sg$2.35 and Sembcorp Marine shed 1.25 percent to Sg$3.96.

— Taipei fell 2.00 percent, or 141.80 points, to 6,956.28.

Taiwan Semiconductor Manufacturing Co. lost 1.18 percent to Tw$75.4 while design house MediaTek dived 6.6 percent to Tw$262.0.

— Manila fell 0.21 percent, or 8.95 points, to 4,282.77.

Lepanto Mining fell 6.8 percent to 1.65 pesos, Ayala Land slipped 0.3 percent to 15.96 pesos and Philippine Long Distance Telephone gained 0.3 percent to 2,414 pesos.

— Wellington closed down 0.34 percent, or 11.09 points, at 3,290.13.

Air New Zealand fell 1.60 percent to NZ$0.92 and Telecom dipped 0.50 percent to NZ$1.99 while Port of Tauranga was up 2.7 percent at NZ$10.07 and Freightways gained 1.8 percent to NZ$3.45.

— Jakarta ended 0.74 percent lower, shedding 29.12 points, to 3,752.67.

— Kuala Lumpur closed 0.61 percent, or 9.03 points, lower at 1,480.92.

Malayan Banking fell 1.1 percent to 8.20 ringgit and telecoms firm Axiata Group was down 0.8 percent at 4.95 ringgit. Public Bank was up 0.5 percent at 12.72 ringgit and Petronas Gas gained 0.1 percent to 13.98 ringgit.

— Bangkok edged up 0.14 percent, or 1.40 points, to 1,030.77.

— Mumbai was closed for a public holiday.—Dow Jones Newswires contributed to this story