Stocks fall on inflation concerns

Asian and European markets sank yesterday as high oil prices stoked inflation fears and investors fretted about the outlook for the US economy after last week's slump on Wall Street.

In Tokyo, the benchmark Nikkei 225 index dropped 322.01 points, or 2.3 percent, to 13,690.19.

"What underlined selling was ongoing concern over inflation as oil prices still remained very high," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC Co in Tokyo.

Crude oil futures rose to a record above $135 a barrel last week and were trading above $133 a barrel in Asian electronic trading late yesterday.

Investors were also anxious after the Dow Jones industrial index lost 1.2 percent on Friday. Investors in Asia closely watch the US economy because it is a major export market.

Sony Corp fell 2.6 percent while electronics maker Kyocera Corp lost 2.1 percent. Japan's top automaker, Toyota Motor Corp, declined 2.5 percent, and its rival Honda Motor Co dropped 3.3 percent.

The Australian share market fell for a third day to an almost three-week low on concerns higher crude oil prices, a stronger Australian dollar and inflation will crimp economic growth and company earnings. The benchmark S&P/ASX 200 index dropped 1.1 percent to 5,707.

In currencies, the dollar was quoted at 103.32 yen midafternoon in Tokyo, slightly up from 103.28 yen in New York late on Sunday. The euro stood at $1.5762, compared with $1.5770 in New York.

European stocks were a little down yesterday, falling for the fourth time in five sessions as fresh asset writedown fears at UBS knocked banking shares lower.

Crude oil prices holding above $130 a barrel also continued to put pressure on stocks as concerns over rising inflation persisted.

Nokia retreated, down nearly 2 percent on market talk that the world's largest cellphone maker may cut its handset prices by as much as 20 percent in a bid to gain a bigger slice of the market from players like Motorola.

Shares in Nokia's Asian rival LG Electronics tumbled more than 8 percent on the rumors.

At 1050 GMT, the FTSEurofirst 300 index of top European shares was down 0.1 percent at 1,320.83 points, after falling 3.2 percent last week.

Both UK and US markets were closed yesterday for a public holiday.

"The focus remains on oil prices, with concerns arising on how a number of sectors will cope with that. We've seen a sharp correction last week on airline stocks after company outlooks, citing high oil prices, disappointed the market," said Benoit De Broissia, analyst at Richelieu Finance, in Paris.

"The pressure from rising commodity prices is now so great that it reignites fears of second-round inflation, with wage hikes," he said.

The rise in oil prices aggravated existing worries among investors over inflation and stripped more than 2 percent off Japan's Nikkei overnight.

Banks were the heaviest negative weight on the market, with the DJ Stoxx index of European banks down 0.7 percent, led by a decline in shares of UBS, down 3.1 percent after the Swiss lender said it continues to be exposed to US mortgages in its prospectus for its upcoming $15-billion rights issue.

Agencies

(China Daily 05/27/2008 page17)