Asian stocks fall on China jitters, yen gains
Thursday, 28 January 2010
SINGAPORE, Jan 27 (Reuters): Asian stocks fell for the ninth straight day Wednesday on fears that China's heightened efforts to rein in soaring credit growth could hamper the global economic recovery.
European stocks were set to follow Asia lower, with financial spreadbetters expecting key indexes in Britain, Germany and France to open as much as 0.6 percent lower, while US stock futures were little changed.
Investors were cautious ahead of the conclusion of a two-day policy meeting by the US Federal Reserve later in the day.
The meeting is expected to yield little in terms of a near-term policy shift. But traders will scour a Fed statement afterwards for clues on how much longer it may leave its ultra-low interest rates and easy money policy in place, and for updates on the health of the US economy.
The meeting is taking place amid a fierce Senate debate over whether Chairman Ben Bernanke should be appointed for a second term, which has also weighed on investor confidence this week.
The euro fell to a nine-month low of 125.31 yen as investors continued to cut risky trades amid a host of unsettling factors.
Besides worries that Chinese imports may slow as policymakers try to keep the economy from overheating, investors have been plagued by worries about Greece's high debt levels and a proposal from the White House that could break up some huge investment banks, which could slash their profits.
Data showed Tuesday US consumer confidence in January hit its highest level in nearly a year and a half, but a closely watched housing index showed an unexpected decline in November prices, giving a mixed view of its economic recovery.
The MSCI index of Asia Pacific stocks outside Japan fell one per cent Wednesday, surrendering brief early gains. The index has lost around nine per cent in the past two weeks, nearing the 10 per cent level that is typically used to define a stock market correction.
The index slid two per cent Tuesday to its lowest in two months after China implemented a rise in bank reserve requirements to curb loan growth.
China's largest bank, ICBC, said Wednesday it has stopped rolling over some loans after a surge in credit at the start of the year, in the latest evidence that banks may finally be heeding a government-directed clampdown.
Many investors had been pricing in a smoother and stronger economic rebound this year, which would justify higher share valuations.
Now that questions are growing about the pace and depth of a recovery, share prices are highly vulnerable to a correction, especially after many global indexes have rallied more than 60 per cent from lows seen in March last year.
Tech shares, which helped lead the strong global equities rally over the last year, have been among the hardest hit by profit taking in recent sessions as investors fear demand for flat screen TVs and other gadgets may weaken if the global recovery stumbles.
In Seoul, LG Electronics Inc fell almost 1.9 per cent to an eight-week low after posting a weaker-than-expected quarterly net profit. Taiwan's tech-heavy index dropped 0.5 per cent to a two-month closing low, after slumping 3.5 per cent Tuesday, on fears that China's tightening measures will curb the island's exports to the mainland.
European stocks were set to follow Asia lower, with financial spreadbetters expecting key indexes in Britain, Germany and France to open as much as 0.6 percent lower, while US stock futures were little changed.
Investors were cautious ahead of the conclusion of a two-day policy meeting by the US Federal Reserve later in the day.
The meeting is expected to yield little in terms of a near-term policy shift. But traders will scour a Fed statement afterwards for clues on how much longer it may leave its ultra-low interest rates and easy money policy in place, and for updates on the health of the US economy.
The meeting is taking place amid a fierce Senate debate over whether Chairman Ben Bernanke should be appointed for a second term, which has also weighed on investor confidence this week.
The euro fell to a nine-month low of 125.31 yen as investors continued to cut risky trades amid a host of unsettling factors.
Besides worries that Chinese imports may slow as policymakers try to keep the economy from overheating, investors have been plagued by worries about Greece's high debt levels and a proposal from the White House that could break up some huge investment banks, which could slash their profits.
Data showed Tuesday US consumer confidence in January hit its highest level in nearly a year and a half, but a closely watched housing index showed an unexpected decline in November prices, giving a mixed view of its economic recovery.
The MSCI index of Asia Pacific stocks outside Japan fell one per cent Wednesday, surrendering brief early gains. The index has lost around nine per cent in the past two weeks, nearing the 10 per cent level that is typically used to define a stock market correction.
The index slid two per cent Tuesday to its lowest in two months after China implemented a rise in bank reserve requirements to curb loan growth.
China's largest bank, ICBC, said Wednesday it has stopped rolling over some loans after a surge in credit at the start of the year, in the latest evidence that banks may finally be heeding a government-directed clampdown.
Many investors had been pricing in a smoother and stronger economic rebound this year, which would justify higher share valuations.
Now that questions are growing about the pace and depth of a recovery, share prices are highly vulnerable to a correction, especially after many global indexes have rallied more than 60 per cent from lows seen in March last year.
Tech shares, which helped lead the strong global equities rally over the last year, have been among the hardest hit by profit taking in recent sessions as investors fear demand for flat screen TVs and other gadgets may weaken if the global recovery stumbles.
In Seoul, LG Electronics Inc fell almost 1.9 per cent to an eight-week low after posting a weaker-than-expected quarterly net profit. Taiwan's tech-heavy index dropped 0.5 per cent to a two-month closing low, after slumping 3.5 per cent Tuesday, on fears that China's tightening measures will curb the island's exports to the mainland.