Asian stocks fall on European summit fears
HONG KONG—Asian markets fell Friday on fears Europe’s leaders will not agree to a deal to tackle their debt crisis as the first day of a crucial summit broke up with plans for a full treaty change in tatters.
With the mood already soured by the European Central Bank (ECB) saying it would not indefinitely buy the bonds of debt-wracked countries, news of the split within the 27-nation bloc left investors’ nerves on edge.
The downbeat outlook for the eurozone also outweighed positive news from China, which said that inflation was at its lowest level for more than a year, raising the prospect of fresh monetary easing by Beijing.
Tokyo fell 1.48 percent, or 128.12 points, to 8,536.46, Sydney lost 1.82 percent, or 77.7 points, to end at 4,203 and Seoul shed 1.97 percent, or 37.64 points, to 1,874.75.
Hong Kong slumped 2.73 percent, or 521.58 points, to 18,586.23 and Shanghai fell 0.62 percent, or 14.55 points, to 2,325.27.
Tensions were running high at the two-day summit in Brussels as leaders struggled to find a deal to finally tackle the debt crisis, which has sent global markets spinning in recent months.
The first day of talks ended with news that the 17 eurozone members plus six non-members would work on a plan for closer integration, with an inter-governmental fiscal union pact ensuring countries set “balanced” budgets.
“We will achieve the new fiscal union. We will have a euro currency within a stable union,” German Chancellor Angela Merkel said.
“We will have stronger budget deficit regulations for eurozone members.”
Merkel and French President Nicolas Sarkozy, who earlier warned there might be “no second chance” for a deal, had argued that full-blown treaty change with tighter fiscal unity was the way to reassure markets that governments will live within their means.
But those plans were dashed when Britain rejected proposals for tough new regulation of the City of London’s financial sector and a suggested tax on financial transactions.
The leaders are also said to be finding progress slow on other issues such as the eurozone’s current and future rescue funds, although Sarkozy said there were plans to pump 200 billion euros into an International Monetary Fund war chest.
ECB chief Mario Draghi poured water on proceedings earlier in the day by saying that action by the bank to buy up the sovereign bonds of debt-wracked countries was “limited” and “temporary.”
Soon after the European Central Bank cut its key rates and boosted measures to help banks, Draghi said it was for governments to solve their problems rather than his bank.
However, after the Thursday talks Draghi said the agreement on tighter fiscal rules offered a “good basis” for a fiscal compact in the region.
Although he added: “We came to conclusions that will have to be fleshed out in coming days.”
The euro remained under pressure in early European trade. The common currency bought $1.3336 and 103.65 yen, compared with $1.3341 and 103.58 yen in New York late Thursday. It was also well down from the $1.3402 and 104.05 yen in Asia on Thursday.
The dollar was at 77.71 yen, from 77.67 yen.
Shares in Shanghai slipped despite data showing consumer prices rose 4.2 percent year on year in November, their slowest pace since September last year.
The rate was well off the 5.5 percent seen in October and much better than the three-year high of 6.5 percent recorded in July.
The country’s consumer price index, a key gauge of inflation, rose 4.2 percent year on year in November, the National Bureau of Statistics said in a statement.
The rate was well below the 5.5 percent recorded in October, but still slightly above the government’s annual target of four percent.
It was the slowest pace since September 2010, when inflation stood at 3.6 percent, and below analysts’ expectations of 4.4 percent.
Friday’s figures raised hopes that China will further ease monetary policy after more than a year of interest rate hikes and other tightening measures that were introduced amid fears of soaring prices.
On oil markets New York’s main contract, light sweet crude for delivery in January, fell 30 cents to $98.04 a barrel.
Brent North Sea crude for January delivery shed 68 cents to $107.43.
Gold was trading at $1,713.99 an ounce at 1030 GMT, from $1,738.40 late Thursday.
In other markets:
— Singapore closed down 1.24 percent, or 33.71 points, at 2,694.60.
United Overseas Bank rose 0.39 percent to Sg$15.36 while Wilmar International fell 1.18 percent to Sg$5.04.
— Taipei shed 1.29 percent, or 89.60 points, to end at 6,893.30.
TSMC shed 2.88 percent to Tw$74.1 while Hon Hai was 1.23 percent lower at Tw$79.7.
— Manila closed 0.47 percent, or 20.39 points, down at 4,292.50.
SM Investments shed 1.42 percent to 521 pesos but Lepanto Consolidated Mining added 0.59 percent to 1.71 pesos, while Philippine Long Distance Telephone gained 0.08 percent to 2,452 pesos.
— Kuala Lumpur fell 0.87 percent, or 12.79 points, to end at 1,460.13.
Budget carrier Air Asia shed 3.17 percent to 3.67 ringgit, while financial firm CIMB Group Holdings inched down 1.43 percent to 6.89 ringgit and telecoms company TIME dotCom gained 0.69 percent to 0.73 ringgit.
— Wellington closed flat, nudging up 1.52 points to 3,271.46.
— Jakarta fell 0.59 percent, or 22.15 points, to 3,759.61.
Bank Mandiri fell 0.8 percent to 6,600 rupiah, Bank Rakyat lost 0.7 percent to 6,700 rupiah and carmaker Astra rose 0.6 percent to 73,050 rupiah.
— Bangkok shed 0.89 percent, or 9.24 points, to close at 1,034.00.
— Mumbai shares slid 287.25 points, or 1.74 percent, at 16,200.99.
