Asian shares mixed after US debt warning

HONG KONG—Asian markets were mixed while the dollar faced heavy selling Thursday after Moody’s warned it could downgrade the United States’ top-class debt rating, raising fears of a default by Washington.

Moody’s blamed US lawmakers’ failure to hammer out a deal that would allow President Barack Obama to raise the country’s debt ceiling, in turn paving the way for it to meet its repayment obligations.

With trillions of dollars of US debt held by countries and corporations around the world, a US ratings downgrade would likely send global markets into a downward spiral.

Tokyo shed 0.27 percent, or 27.02 points, to end at 9,936.12, with exporters hurt by the yen’s strength against the greenback, and Sydney closed 0.53 percent, or 24.1 points, off at 4,490.7.

Seoul was flat, edging up 0.43 points to close at 2,130.07 while Hong Kong also ended flat, adding 13.32 points to 21,940.20

Shanghai gained 0.54 percent, or 14.97 points at 2,810.44.

“The review of the US government’s bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes,” Moody’s said.

Ratings agency Standard’s & Poor’s in April also downgraded its outlook for the US, citing the budget deadlock.

The action came as Obama and Democratic lawmakers and their Republican counterparts held a fourth straight day of talks to try to hammer out an agreement on a deficit-reduction budget.

Republicans are refusing to lift the country’s $14.29 trillion debt ceiling without deep government spending cuts, and they reject Democrats’ demand that tax increases must be part of any sweeping deficit reduction plan.

The prospect of a downgrade hit the dollar, which has tumbled since the end of last week after poor jobs data and the ongoing eurozone debt crisis, while the yen surges due to its safe-haven status.

In choppy Asian trade, the dollar swung above and below its 78.98 yen level from New York late Wednesday. Its volatility was driven by some large-lot purchases from overseas investors, dealers said. At one point both the dollar and euro rose sharply versus the yen before falling back. It was at 78.97 in early European trade.

The euro, which tumbled this week due to fears over the European sovereign debt crisis, was given some respite.

The row over US debt took pressure off the euro, which firmed to $1.4198 from $1.4168, and to 112.11 yen from 111.76 yen.

The dollar was also lower after Federal Reserve chairman Ben Bernanke told legislators Wednesday that the central bank was “prepared to respond” if stimulus was needed to kickstart the ailing US economy.

“The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying the need for additional policy support,” Bernanke said.

His comments signalled to some that he was keeping the door open for a third round of quantitative easing. The bank in June wound up its $600-billion “QE2” bond purchasing program that aimed to boost the economy with easy liquidity.

Global markets have slumped this week as the eurozone debt woes continue, with fears of a default in Greece spreading to Italy and Spain.

Those concerns deepened after Fitch became the last of the three ratings agencies to downgrade Greece to junk status as European officials struggle to hammer out a bailout plan for the beleaguered country.

In Sydney, Rupert Murdoch’s News Corp. closed up 3.12 percent despite abandoning its $14 billion bid for the 61 percent it does not own of British satellite television provider BSkyB.

He pulled out of the deal amid a phone hacking scandal at the firm’s British newspapers that has seen the closure of the Sunday tabloid News of the World.

Uncertainty in global markets sent gold soaring because of its status as a safe haven. The precious metal closed at $1,582.50-$1,583.50 in Hong Kong – up from Wednesday’s close of $1,571.50-$1,572.50 – after hitting a record high 1,587.97 in London.

New York’s main contract, West Texas Intermediate for delivery in August, was up seven cents to $98.12 a barrel in afternoon trade.

Brent North Sea crude for August delivery eased 30 cents to $118.48.

In other markets:

— Singapore rose just 0.28 points to 3,088.70.

Singapore Airlines added 0.28 percent to Sg$14.29 and Keppel Corp fell 0.28 percent to Sg$10.68.

— Taipei closed flat, edging down 6.71 points at 8,481.35.

HTC rose 6.78 percent to Tw$929.0 while Hon Hai was 1.53 percent lower at Tw$90.3.

— Manila rose 0.44 percent, or 19.55 points, to 4,423.55.

Metropolitan Bank & Trust jumped 3.6 percent to 76.95 pesos and Philex Mining put on 3.0 percent to 26.15 pesos while Manila Electric added 0.7 percent to 270 pesos.

— Wellington fell 0.43 percent, or 14.85 points, to 3,409.55.

The loss came as economic growth data, which beat forecasts made in the wake of February’s devastating earthquake, sent the local currency to a record high US$0.8490, its strongest since the currency was floated 26 years ago.

Outdoor clothing retailer Kathmandu Holdings dropped 3.1 percent to NZ$2.21 and Fletcher Building was 1.1 percent lower at NZ$8.13.

— Jakarta rose 0.42 percent, or 16.79 points, to 3,997.63.

Car distributor Astra International rose 1.4 percent to 68,950 rupiah, while energy company Indika gained 0.7 percent to 3,725 rupiah.

— Kuala Lumpur ended flat, losing 0.83 points to 1,579.84.

Finance firm CIMB Group lost 0.3 percent to 8.79 ringgit and gaming giant Genting inched down 0.4 percent to 10.98 ringgit. Budget carrier AirAsia gained 0.9 percent to 3.55 ringgit.

— Bangkok edged up 0.23 percent, or 2.51 points, to 1,079.91.

Banpu rose 8.00 to finish at 728 baht, and PTT Plc gained 2 baht to 334.

— Indian shares edged up 0.12 percent in lackluster trade, a day after deadly blasts rocked Mumbai, killing at least 17 people.

The benchmark 30-share Sensex index ended up 22.18 points to 18,618.2.

India’s largest software exporter Tata Consultancy Services fell 2.23 percent or 25.65 rupees to 1,125.25, ahead of its first quarter earnings, later in the day.

The country’s only listed microlender SKS Microfinance fell 10 percent or 52.85 rupees to 476 after it had rallied sharply in the past few days, after the government had released a draft regulation, which empowers the Reserve Bank of India to regulate the sector.