WORLD> Asia-Pacific
|
WORLD> Asia-Pacific
|
|
Asia stocks drop as economic fear grips investors
(Agencies)
Updated: 2009-01-08 16:24 HONG KONG -- Asian stocks and emerging market currencies fell on Thursday, after dire US private employment data and fears about corporate earnings cooled investor willingness to take risks for higher returns.
Major European stocks markets were expected to fall as much as 1.2 percent, according to financial bookmakers, following a 3 percent drop in US stocks overnight. The financial crisis of 2008 has snowballed into a global economic crisis in 2009, with consumer spending crippled, Asian exports collapsing and unemployment rising at an alarming rate. "We saw a bit of hope earlier that the world may be in for a quick recovery, but the reality is there are still a fair bit of problems in markets," said Lucinda Chan, division director at Macquarie Equities in Australia. Hopes that fiscal stimulus measures will support global growth, which fed the recent stock market rallies around the world, have been tempered by the cold, hard economic reality. A report showed the US private sector shed 693,000 jobs in December, increasing chances the US payrolls report due on Friday will reflect greater job losses than the expected 500,000. Stimulus aimed at infrastructure and interest rate cuts can take a long time to be fully felt, and company earnings are likely to deteriorate further in early 2009. Japan's Nikkei share average fell 3.9 percent, after stringing together its longest winning streak since one that ended in April 2006. Technology shares in particular were under fire after Intel Corp cut its fourth quarter sales forecast for the second time. In Japan, electronic parts maker Kyocera Corp was one of the top drags on the Nikkei, sliding 6.6 percent, while Hong Kong-listed PC maker Lenovo Group sank 22 percent after warning of a quarterly loss and cutting jobs. The MSCI index of Asia-Pacific stocks outside Japan was down 4 percent. Expectations of even slower demand for raw materials dragged on metals prices, while US crude was steady around $42.65 a barrel after a surprising buildup of inventories unleashed a brutal 12 percent selloff on Wednesday. TOO EARLY FOR RECOVERY TRADES Equity markets usually turn higher toward the end of negative economic cycles, as investors anticipate turning points well before they take place, sometimes six months prior. Some analysts have cited this as a reason for the strength in demand for stocks, high-grade credit and commodities. However, the severity of this global slowdown makes seeing into the future an even more treacherous task than it usually is. "Our judgment is that the end of the global recession remains far enough in the future, and uncertain enough in timing, if not depth, that it is too early to swing fully into recovery trades," JPMorgan asset allocation strategists said in a note. They recommended sticking with bets on further strength in government bonds, especially shorter maturities in Europe, as well as on US stocks since they will likely benefit from the one-two punch of fiscal stimulus and zero interest rates. Emerging market currencies weakened as the global equity rally came to a halt. Singapore and Malaysia are two economies most leveraged to demand from the developed world, according to Societe Generale economists. The US dollar rose 0.6 percent against the Singapore dollar and 0.9 percent against the Malaysian ringgit. The US dollar recovered against the euro and other major currencies but pinning down a trend has been difficult so early in the year. The euro was down 0.2 percent to $1.3620. The benchmark 10-year Treasury note yield was at 2.46 percent, down from 2.50 percent late in New York. The 30-year bond yield rose to a one-month high of 3.06 percent before ticking lower. Despite the fall in US yields, returns on some quality corporate bonds were peeling investors away from the relative pittance offered by Treasuries. For example, US corporate bonds have returned about 4.6 percent over the past month, while high-yield bonds posted returns of about 15 percent in the period, according to Merrill Lynch data. The 10-year Japanese government bond future slipped to a one-month low of 138.62 after weaker-than-expected results from a 10-year debt auction. |
