Asia stocks down on US impasse, eurozone debt
HONG KONG—Asian stocks edged down Monday on fears US lawmakers will not agree a budget to avoid a default in the world’s number one economy as well as the ongoing eurozone crisis.
Investors chose to brush off news that fewer than expected European banks had failed stress tests, while the euro suffered fresh selling pressure and gold hit a record high above $1,600 an ounce.
Hong Kong fell 0.32 percent, or 70.63 points, to 21,804.75, Shanghai fell 0.12 percent, or 3.48 points, to 2,816.69 and Seoul closed 0.69 percent, or 14.72 points, lower at 2,130.48.
Sydney ended flat, edging down 1.5 points to 4,472.
Tokyo was closed for a public holiday.
Traders are growing nervous over the United States, where President Barack Obama and the Republican party struggled to make progress at the weekend in hammering out a deal to raise the debt ceiling.
On Sunday a cross-party Senate plan took shape that could see a default being averted in return for $1.5 trillion in spending cuts over a decade.
But traders were skeptical about the prospects of a near-term political resolution.
If the two sides are unable to reach an agreement by the August 2 deadline the world’s biggest economy will likely default on its debt obligations, a scenario Obama described as economic “Armageddon” that would have a devastating global effect.
The eurozone crisis also continues to weigh as officials struggle to make headway on a second bailout for Greece, which narrowly avoided a default last month.
Markets have become skittish ahead of a European Central Bank (ECB) meeting that will discuss the bailout Thursday, with many concerned by weekend comments by ECB president Jean-Claude Trichet and German Chancellor Angela Merkel.
Trichet on Sunday said the ECB could not accept defaulted bonds as collateral and Europe’s governments would have to intervene should Greece default.
And Merkel called on Greece’s private sector to increase its involvement in shouldering Athens’ financial burden as pressure mounts for a radical solution to the country’s debt problems.
Greece’s financial woes have raised concerns of a spillover into Italy and Spain, which many analysts fear could lead to another global financial crisis.
Traders were little moved by Friday’s announcement by the European Banking Authority that just eight lenders – including five from Spain and two from Greece –out of 91 had failed its stress tests.
The EBA had set out certain capital requirements it deems essential to act as a buffer against any unforeseen financial shocks.
The EBA said the banks, which also included one from Austria, had a total shortfall of 2.5 billion euros ($3.5 billion), while the total number of failures was less than expected by markets.
The announcement, however, was tainted by criticism that the tests did not include the possibility of a sovereign debt default.
“The stress tests came out and to all intents and purposes on the surface didn’t look too bad, but the market is fairly and squarely focused on the risk of sovereign default and the risk of contagion in Europe,” said HiFX Trading Director Mike Hollows in New Zealand.
And Prakash Sakpal, an economist at ING Financial Markets Research, told Dow Jones Newswires: “The debt crisis in the US and European Union will remain the main driving force for global markets this week and beyond.”
The banking results gave some immediate respite to the euro Friday but the single currency slipped back in early European trade on Monday. It was at $1.4050 from $1.4150 late Friday in New York, and at 111.05 yen, from 112.00.
The greenback edged down to 79.02 yen from 79.14 yen on Friday.
In Sydney, Rupert Murdoch’s News Corporation slumped 4.13 percent as the phone hacking scandal that brought down the top-selling News of the World in Britain rumbled on.
The dive came after Rebekah Brooks, the former head of Murdoch’s British newspaper wing, was arrested on Sunday.
Brooks was questioned for 12 hours over allegations that she conspired to intercept communications and that the News of the World Sunday tabloid, of which she was editor, paid police for stories.
At the same time, Britain’s top police officer resigned due to speculation about his links to the Murdoch empire and the force’s botched investigation into phone hacking.
Gold hit $1,600.10 an ounce in early European trade as dealers bought into the precious metal for its safe-haven status due to the uncertain economic future in the eurozone.
In oil markets, New York’s main contract, light sweet crude for delivery in August, fell 13 cents to $97.11 per barrel in the afternoon while Brent North Sea crude for September slipped 36 cents to $116.90.
In other markets:
— Singapore closed down 0.17 percent, or 5.29 points, at 3,078.95.
City Developments slid 2.77 percent to Sg$10.19 and Overseas-Chinese Banking Corp fell 0.64 percent to Sg$9.33.
— Mumbai fell 0.30 percent, or 54.88 points to 18,507.04.
Software exporter TCS fell 1.97 percent or 22.65 rupees on concerns of outsourcing, while Tata Motors slid 1.94 percent or 20.1 rupees to 1,016.15.
— Taipei fell 0.42 percent, or 36.34 points, to 8,538.57.
Leading smartphone maker HTC lost 3.97 percent at Tw$871.0 on a preliminary ruling of the US International Trade Commission which said it had infringed two patents held by US giant Apple. HTC has said it will appeal.
Taiwan Semiconductor Manufacturing Co fell 0.29 percent to Tw$69.7.
— Manila rose 0.39 percent, or 17.27 points, to 4,476.01.
Banco de Oro rose 3.5 percent to 59 pesos and geothermal power producer EDC was up 0.6 percent at 6.92 pesos.
— Wellington fell 0.60 percent, or 20.50 points, to 3,385.88.
Fletcher Building shed 0.6 percent to NZ$8.00 and stock exchange operator NZX Ltd dropped 3.5 percent to NZ$2.22.
— Kuala Lumpur ended down 0.93 percent, or 14.67 points, at 1,562.58.
Oil and gas firm Kencana Petroleum lost 1.3 percent to 2.95 ringgit, while budget carrier AirAsia inched down 0.3 percent to 3.48. Oil and gas company Shell Refining gained 0.2 percent to 10.44 ringgit.
— Jakarta rose 0.24 percent, or 9.77 points, to 4,032.97.
Car maker Astra rose 3.1 percent to 72,600 rupiah and rival Indomobil gained 1.9 percent to 10,650 rupiah, while coal producer Adaro added two percent to 2,600 rupiah.
— Bangkok rose 0.37 percent, or 4.03 points, to 1,083.94.
Banpu gained 8 baht to 736, while PTT added 4 baht to 338.
