Asian markets higher after EU debt deal
HONG KONG—Asian markets were mixed Monday as optimism over last week’s European plan to introduce tougher fiscal rules to save the eurozone was weighed by lingering concerns leaders may not have done enough.
Traders remained nervous as Britain chose not to join the deal, while eyes will be on Standard & Poor’s, which last week warned the eurozone of a downgrade if it is unable to come up with a viable plan.
Adding to uncertainty was an announcement on Monday by Moody’s that it will review the credit ratings of all EU countries early next year after what it described as Friday’s failure to deliver “decisive policy measures.”
Tokyo rose 1.37 percent, or 117.36 points, to 8,653.82, Sydney closed 1.18 percent stronger, rising 49.8 points to 4,252.8 and Seoul added 1.33 percent, or 25.01 points, to close at 1,899.76.
In the afternoon Hong Kong closed flat, edging down 10.57 points to 18,575.66 and Shanghai slipped 1.02 percent, or 23.72 points, to 2,291.55. The two bourses were also weighed by lingering concerns over China’s slowing growth.
On Friday 26 of the 27 EU members backed tighter budget policing in a “new fiscal compact” to resolve the crisis threatening to crack apart the monetary union and send the global economy into another deep recession.
The 17 eurozone nations signed up to the pact – which gives the EU more power over national budgets – while nine non-members “indicated the possibility to take part in this process” after consulting their parliaments.
However, Germany’s hopes for a treaty revision were dashed when Britain’s Prime Minister David Cameron opted out of the plan by using his veto, saying he could not get the protection he wanted for the London’s financial center.
“This provides a framework for medium term improvement in debt levels,” said Ric Spooner, currency strategist at CMC Markets in Sydney, according to Dow Jones Newswires.
RBS head of domestic sales trading and execution Justin Gallagher said a European collapse was avoided but “that doesn’t necessarily mean Europe won’t continue to be a battle in the short to medium term.”
Some leaders hope the pact will convince the European Central Bank to drop its reluctance to use its full arsenal against the crisis after ECB president Mario Draghi called for a “new fiscal compact” last week.
Draghi dubbed the summit decisions a “very good outcome” for the eurozone.
Leaders also planned to pump 200 billion euros ($267 billion) into IMF coffers to help the eurozone, which is struggling to boost its own rescue fund to one trillion euros.
The ECB would act as an agent for the bailout fund, the European Financial Stability Facility (EFSF).
The EFSF’s successor, the European Stability Mechanism (ESM), will come into force earlier than first mooted in July 2012, with a lending capacity of 500 billion euros.
Standard & Poor’s is expected to pass judgment on the agreement this week after putting 15 of the euro-member states – including France and Germany – on downgrade warning.
The agency last week announced the bloc’s AAA status was on credit watch citing worsening economic conditions and discord among leaders.
Robert Rennie, chief currency strategist for Westpac in Sydney, said: “The question we all need answered is will this loose pack stand the test of time or will nations just walk away from this agreement at the first hint of trouble.
“The markets will use S&P’s view as a report card on whether that was achieved.”
Fellow ratings agency Moody’s, meanwhile, said: “The absence of measures to stabilize credit markets over the short term means that the euro area, and the wider EU, remain prone to further shocks and the cohesion of the euro area under continued threat.
“In view of the continued absence of decisive policy measures despite the recent euro area summit, Moody’s Investors Service is reiterating its intention to revisit the ratings of all EU sovereigns during the first quarter of 2012.”
In European trade the euro slipped, buying $1.3332 and 103.50 yen on Monday, down from $1.3384 and 103.93 yen late Friday in New York where the common European currency rose on the EU deal.
The dollar was at 77.72 yen compared with 77.60 yen late Friday.
On oil markets New York’s main contract, light sweet crude for January delivery, dropped 65 cents to $98.76 a barrel and Brent North Sea crude for January delivery fell 86 cents to $107.76.
Gold was trading at $1,680.94 an ounce at 1030 GMT, from $1,713.99 late Friday.
In other markets:
— Singapore closed 0.26 percent, or 7.12 points, up at 2,701.72.
Sembcorp Industries fell 1.91 percent to Sg$4.11 while Singapore Telecommunications gained 2.56 percent to Sg$3.21.
— Taipei rose 0.81 percent, or 55.74 points, to 6,949.04.
Hon Hai Precision gained 2.76 percent to Tw$81.9 while Taiwan Semiconductor Manufacturing Co. was 1.21 percent higher at Tw$75.0.
— Manila slipped 0.38 percent, or 16.16 points, to 4,276.34.
Philippine Long Distance Telephone closed unchanged at 2,452 pesos while San Miguel Corp. fell 1.00 peso to 117.00 pesos.
— Wellington closed 0.86 percent, or 28.05 points, higher at 3,299.51.
Contact Energy rose 0.74 percent to NZ$5.44 and Telecom added 0.71 percent to NZ$2.13 while Air New Zealand ended flat at NZ$0.92.
— Kuala Lumpur gained 0.48 percent, or 6.97 points, to cloe at 1,467.10.
RHB Capital rose 1.5 percent to 6.90 ringgit, Genting added 1.9 percent to 10.82 ringgit and Tenaga Nasional fell 0.5 percent to 5.50 ringgit.
— Jakarta ended 0.87 percent, or 32.54 points, higher at 3,792.15.
Car maker Astra rose 2.6 percent to 74,950 rupiah and coal producer Bumi gained 1.1 percent to 2,225 rupiah.
— India’s Sensex index of 30 leading shares closed down 343.11, or 2.12 percent, at 15,870.35, dragged down by manufacturing, infrastructure, energy and mining stocks after weak industrial data.
— Bangkok was closed for a public holiday.
