Asian markets mixed after Wall Street rally

HONG KONG—Asian shares were mixed Wednesday as a Wall Street rally prompted by reports of an EU plan to help troubled banks was offset by lingering fears that Greece’s debt crisis will become contagious.

While US traders welcomed a coordinated effort by European leaders to recapitalize lenders, Asian investors were more skeptical after news that Franco-Belgian bank Dexia would be broken up and Italy’s debt rating was cut.

Tokyo fell 0.86 percent, or 73.14 points, to 8,382.98, Seoul lost 2.33 percent, or 39.67 points, to close at 1,666.52 points and Taipei shed 0.83 percent, or 58.72 points, to 6,989.15.

Singapore closed flat, inching down 0.09 percent, or 2.31 points, to 2,528.71.

However, Sydney’s benchmark S&P/ASX 200 closed in positive territory for the first time this week, ending 1.40 percent, or 54.3 points, higher at 3,926.4.

Hong Kong and Shanghai were closed for public holidays.

The region was given a strong lead from Wall Street, where the Dow closed up 1.44 percent, the S&P 500 rose 2.25 percent and the Nasdaq added 2.95 percent after the EU’s economic affairs commissioner said leaders were working on a plan to help banks.

“There is an increasingly shared view that we need a concerted, coordinated approach in Europe while many of the elements are done in the member states,” the Commissioner Olli Rehn told the Financial Times.

“There is a sense of urgency among ministers and we need to move on,” he added.

“Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty,” Rehn said in comments run on the British newspaper’s website.

But BBY senior institutional trader Peter Copeland warned in Sydney: “The market is going to treat this (US) rally with suspicion because there’s no detailed plan (to contain the European debt crisis) yet.”

“At the moment it’s talk and nothing has been implemented,” he told Dow Jones Newswires.

The lack of movement on a solution to the Greek problem raised the prospect that holders of Athens’ debt, already expecting to take a 20 percent “haircut” on its value, could now find it written down more than 50 percent if it cannot raise any more money and defaults as a result.

Pessimism over Greece has grown as European leaders are at odds over the best way to boost the ailing country and protect other economies and bond-holders if it does eventually default.

It has not been helped by the slow pace of ratification in each of the 17 eurozone members of a 440-billion-euro bailout fund to help struggling economies.

In another blow to the euro area, Italy saw its government bond rating downgraded by Moody’s on Tuesday, from Aa2 to A2 with a negative outlook.

The three-notch reduction exceeded analyst expectations of a one- or two-level downgrade.

Moody’s cited risks for the financing of long-term debt and slow economic growth.

Italy, along with Spain, is another economy many fear could be in need of bailout cash after Ireland, Greece and Portugal were rescued.

The negative outlook, which suggests a further downgrade in the near future, “reflects ongoing economic and financial risks in Italy and in the euro area,” the agency said.

The Moody’s move came two weeks after fellow ratings agency Standard & Poor’s downgraded Italy’s sovereign debt rating, citing economic, fiscal and political weaknesses.

Adding to the unease over Europe’s banks was news that France and Belgium were forced to intervene Tuesday to guarantee the financing of troubled cross-border bank Dexia.

After an emergency late-night meeting Tuesday, Belgium approved the creation of a so-called “bad bank” to house Dexia’s riskiest debts while protecting its core business – meaning it will be dismantled.

Shares in Dexia, which had plunged 22 percent on Tuesday, rose 4.07 percent to stand at 1.049 euros on Wednesday, losing some initial gains.

The lender, which holds billions of euros of Greek and Italian debt, was one of the first banks to be bailed out during the 2008 crisis.

The euro fell to $1.3312 in early morning London trade from $1.3338 in New York late Tuesday.

The single currency also dipped to 102.06 yen from 102.14 yen.

The dollar inched down to 76.70 yen from 76.82 yen.

However, European markets rallied on opening, rebounding from a sharp slump on Tuesday.

In early trade, London’s FTSE-100 gained 1.68 percent, the Frankfurt DAX was up 1.57 percent and in Paris the CAC-40 added 2.16 percent.

New York’s main oil contract, West Texas Intermediate for delivery in November, was up $2.25 to $77.92 per barrel.

Brent North Sea crude for November delivery gained $2.00 to $101.79.

By 1100 GMT gold was at $1,614.05 an ounce.

In other markets:

— Manila fell 0.18 percent, or 6.79 points, to 3,823.13.

Discount supermarket chain Puregold Price Club plunged 12 percent from its initial public offering price to 11 pesos on its trading debut, while Philippine Long Distance Telephone finished 1.30 percent down to 2,120 pesos.

— Wellington ended 0.2 percent higher, or 7.08 points, to 3,327.47.

Australasian food maker Goodman Fielder added 3.5 percent while retailers were also mostly higher –with Restaurant Brands adding 2.8 percent and clothing chain Hallenstein Glasson Holdings up 1.7 percent.

— Indonesian shares rose 0.73 percent, or 23.79 points, to 3,293.24.

— Bangkok edged up 0.84 percent, or 7.20 points, to 862.65.

PTT gained 8 baht to 250, while Banpu added 4 baht to 518.

— Kuala Lumpur shares gained 1 percent, or 14.29 points, to 1,375.67.

Malayan Banking led the rise, gaining 1.7 percent to 8.01 ringgit, Axiata Group, which gained 3.4 percent to 4.80 ringgit, and Gamuda’s 5.8 percent increase to 2.96 ringgit.

— Indian shares fell 0.46 percent, or 72.45 points, to 15,792.41.

India’s largest private aluminium firm Hindalco fell 4.05 percent to 119.65 while private bank ICICI Bank fell 2.89 percent to 777.55.