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Asian markets slip on lack of Fed stimulus hint

June 8, 2012

HONG KONG: Asian markets fell today as European debt woes and disappointment at US Fed chief Ben Bernanke’s failure to commit to any new stimulus measures overshadowed a surprise Chinese interest rate cut.

Japanese shares were dented despite figures showing the economy grew faster than first thought, while the strong yen and weak demand in Europe hit the country’s exports.

Tokyo tumbled 2.09%, or 180.46 points, to 8,459.26 while Seoul shed 0.67%, or 12.31 points, to 1,835.64 and Sydney fell 1.09%, or 44.9 points, to 4,063.7.

In the afternoon Hong Kong slipped 0.60% and Shanghai lost 0.12%.

In closely watched comments yesterday, Bernanke told Congress he was upbeat about “moderate” growth in the world’s top economy and was “prepared to take action” to provide support, but gave no hint of stimulus measures.

Traders had been hoping for an indication that the central bank was willing to step in to protect the country from headwinds in Europe as well as weakness in China.

“Chairman Bernanke’s testimony to the Senate was balanced, disappointing those who were looking for a clear signal” that a US economic recovery was on its way, Barclays Capital said in a note to clients.

Adding to the gloom was news that Fitch had slashed Spain’s credit rating by three notches yesterday, from A to BBB – just above junk – and warned it would likely stay in recession this year and next.

The cut moved Madrid a step closer to needing an international bailout, following the path of Greece, Ireland and Portugal, as it grapples with a fiscal crisis as well as a struggling banking sector.

Spain’s banks now needed “around 60 billion euros (US$75 billion) and as high as 100 billion euros (US$125 billion) in a more severe stress scenario”, Fitch said.

The euro fetched US$1.2520 and 99.22 yen in afternoon Asian trade, compared with US$1.2561 and 100.01 yen late yesterday in New York.

The common currency had risen in US trade on hopes for European Central Bank action to help quell the eurozone’s financial turmoil.

The dollar was at 79.26 yen against 79.58 yen.

Global concerns deflected attention from Beijing’s decision to cut interest rates for the first time in three-and-a-half years as it looks to kickstart its own economy, which has been hit by a series of downcast data in recent months.

The People’s Bank of China late yesterday said it would cut rates by 25 basis points – the first cut since late 2008 during the financial crisis – while also easing restrictions on deposit and lending rules.

“It will probably take more than one interest rate cut to put the economy on an upward trajectory,” Howhow Zhang, head of research at Shanghai consulting firm Z-Ben Advisors, told Dow Jones Newswires.

In Japan the government said the economy grew 1.2% in January-March from the previous three months, revising upward a preliminary figure of 1.0% growth.

On an annualised basis, the economy grew a revised 4.7% in the quarter, higher than a preliminary 4.1% rise, according to the Cabinet Office.

However, exports took a hit after the yen reached record highs against the dollar late last year while surging energy prices sent import costs higher, denting the country’s trade surplus. The ongoing crisis in Europe also saw demand in Japan’s biggest export market tumble.

On Wall Street the Dow rose 0.37%, extending Wednesday’s 2.4% rally, the S&P 500 was flat and the tech-rich Nasdaq fell 0.48%.

Oil prices eased. New York’s main contract, light sweet crude for delivery in July, was down US$1.43 to US$83.39 a barrel and Brent North Sea crude for July delivery shed US$1.24 to US$98.69 in the afternoon.

Gold was at US$1,568.60 an ounce at 0635 GMT, compared with US$1,625.33 late yesterday.

In other markets:

  • Taipei fell 1.14%, or 80.66 points, to 6,999.65. HTC shed 6.88% to Tw$352.0 while TSMC was 1.25% lower at Tw$77.9.
  • Wellington closed 0.70%, or 24.48 points, lower at 3,449.47. Fletcher Building shed 1.3% to NZ$6.21 and Telecom fell 2.6% to NZ$2.44 and Chorus dropped 1.88% to NZ$3.14.



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