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Asian stocks fall despite Europe, China rate cuts

July 6, 2012

HONG KONG: Asian markets fell today as apparently coordinated action by Europe and China to stimulate the global economy failed to reassure wary investors ahead of US jobs data due later in the day.

Tokyo closed down 0.65%, or 59.05 points, at 9,0120.75 and Seoul ended 0.92%, or 17.29 points, lower at 1,858.20, with Samsung Electronics falling despite posting a record quarterly operating profit guidance figure.

Sydney closed down 0.27%, or 11.40 points, at 4,157.8.

In afternoon trade, Hong Kong retreated 0.18% to 19,773.75 and Shanghai was off 0.57% at 2,188.76.

“Despite a wave of stimulus measures announced overnight by various central banks, it seems such policies are having a muted effect on investor sentiment,” IG Markets analyst Cameron Peacock said in Sydney.

The European Central Bank yesterday trimmed eurozone borrowing costs by a quarter of a percentage point to 0.75%, in a widely anticipated move, and Denmark followed suit, cutting its key rate by 0.25%.

Shortly beforehand, the Bank of England announced it was keeping its main interest rate at a record low 0.50% and said it would increase its quantitative easing stimulus policy by 50 billion pound (US$78 billion) to boost Britain’s recession-hit economy.

China’s central bank also trimmed rates for the second time in a month, a surprise move that analysts said may indicate the world’s second-biggest economy is slowing more quickly than expected.

International Monetary Fund chief Christine Lagarde Friday hailed the ECB move and other recent “significant steps” to contain the eurozone crisis but warned that “more needs to be done”.

Markets were disappointed that the widely expected ECB move was not accompanied by additional stimulus measures to tackle the eurozone crisis.

Cautious investors were also awaiting the June US labour report for signs about the state of the world’s largest economy, and whether it would prompt the US Federal Reserve to step in with fresh easing measures.

“Investors are in a wait-and-see mood now, with important US jobs data due later today,” Investrust CEO Hiroyuki Fukunaga told Dow Jones Newswires.

On Wall Street, traders shrugged off the rate moves in Europe and China to focus on US data showing weakness in consumer spending.

The Dow Jones Industrial Average ended down 0.36%, or 47.15 points, at 12,896.67 yesterday.

The S&P 500-stock index lost 0.47%, or 6.44 points, to 1,367.58, while the tech-rich Nasdaq added a bare 0.04 points to 2,976.12.

Concern was spurred by the ICSC June sales report showing same-store sales for big retailers excluding Walmart were only up 0.2% from a year ago – a third straight month of weak growth.

On currency markets the euro lost more ground in Asian trade today.

The common currency was changing hands at US$1.2380 in Tokyo afternoon trade, down from US$1.2391 in New York late yesterday.

Against the safe-haven Japanese currency, the euro dipped further to 98.89 yen, from 99.00 yen in US trade.

The dollar, meanwhile, was stable at 79.90 yen, up slightly from 79.88 yen in New York trade, after data Thursday showed US unemployment benefits tumbled last week, suggesting an easing in layoffs and beating analyst expectations.

Oil was lower in afternoon Asian trade, with New York’s main contract, light sweet crude for August delivery, shedding US$1.13 to US$86.09 a barrel and Brent North Sea crude for delivery in August sliding US$1.22 to US$99.48.

Gold was worth US$1,603.80 an ounce at 0615 GMT, compared with US$1,618.30 late yesterday.

In other markets:

  • Taipei fell 19.19 points, or 0.26%, to 7,368.59. HTC shed 5.15% to Tw$322.0 while Chunghwa Telecom was 0.11% higher at Tw$95.2.
  • Wellington fell 5.50 points, or 0.16%, to 3,478.70. Telecom Corp shed 1.4% to NZ$2.455 and Freightways dropped 0.8% to NZ$3.86 while Fletcher Building up 0.8% at NZ$6.27.



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