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Asian Stocks Fall On Worries About Europe

4/23/2012 5:49 AM ET

Asian markets fell across the board on Monday, as political worries about Europe offset improved Chinese data. Budget talks among the Netherlands ruling coalition collapsed over the weekend and Socialist Party candidate Francois Hollande, who pledged to renegotiate the euro-zone's fiscal compact and reverse Sarkozy's 2010 pension reforms, won the first round of voting in the French presidential elections on Sunday, prompting investors to adopt a cautious stance.

The euro retreated from two-week highs against the dollar as Hollande remained favorite to win the final runoff on May 6 after besting Sarkozy in the first round. Analysts fear that a victory by Hollande could destabilize the united front between Germany and France that has been key to Europe's response to its financial crisis.

Adding to worries was an announcement from ratings agency Fitch that it would place AAA rated Holland on ratings review if it fails to reduce its fiscal deficit and implement economic reforms.

Tokyo shares fell modestly, as investors remained focused on this week's Bank of Japan's policy board meeting for directional cues. The Nikkei average finished down 0.2 percent, while the broader Topix index declined 0.3 percent. Export-linked shares fell sharply, with automakers such as Toyota Motor, Nissan and Isuzu losing 1-2 percent, as the yen strengthened against other major currencies in early Asian deals.

Mitsui Chemical tumbled 4.1 percent after an explosion at a plant belonging to the company killed an employee and injured 11 other people at the site. Pharmaceuticals and telecom shares rose, with Takeda Pharmaceutical rising 2 percent and Softbank gaining 0.9 percent, as uncertainty over the French presidential runoff election on May 6 prompted investors to put their money into solid defensive stocks.

China's Shanghai Composite index fell 0.8 percent after the latest data on the nation's manufacturing activity showed the economy is still in contraction mode. A key survey revealed today that China's manufacturing activity shrank for a sixth consecutive month in April, owing to slower contraction in output, new orders and employment. The HSBC/Markit purchasing managers' index rose to 49.1 in April from 48.3 in March, pointing to a slower pace of deterioration than in March.

Hong Kong's Hang Seng index fell 1.8 percent, suffering its worst daily loss, as China Mobile tumbled 3 percent after it reported quarterly profit that missed analysts' estimates. Investors barely reacted to weekend news that the IMF has secured pledges totaling $430 billion to deal with Europe's lingering debt crisis.

Australian shares snapped a three-day winning streak, as political developments in Europe and positive manufacturing data from China reflected the mixed global outlook. Both the benchmark S&P/ASX 200 and the broader All Ordinaries index shed around 0.3 percent each.

The big four banks finished mostly higher, albeit posting modest gains, as investors looked ahead for a rate cut at the RBA's board meeting on May 1. The central bank has already indicated that it will consider cutting the cash rate if inflation was not too high. The CPI figures will be released on Tuesday by the Australian Bureau of Statistics.

Big miner BHP Billiton shed half a percent, gold miner Newcrest Mining fell 1.6 percent and oil & gas producer Santos lost 1.5 percent as the dollar's gains against the euro put pressure on commodities. Cockatoo Coal slumped 7.3 percent after South Korea's SK Network backed out of a planned $313 million cash injection in the Australian producer.

South Korea's Kospi average recouped early losses to finish largely unchanged with a negative bias, as investors waited for a crucial two-day meeting of the U.S. Federal Reserve starting Tuesday followed up by the Bank of Japan on Friday. Economy-sensitive shipbuilders bore the brunt of the selling, with Samsung Heavy Industries and Daewoo Shipbuilding tumbling around 3 percent each, while LG Display rose 2.9 percent ahead of its first-quarter results tomorrow. SK Networks ended 0.6 percent lower after saying that it scrapped a plan to buy a 40 percent stake in Australia's Cockatoo Coal .

New Zealand's benchmark index NZX-50 eased 0.1 percent, dragged down by Cavalier after it issued a profit warning last week. Shares of the carpet maker plunged 6.4 percent to a three-year low, while gold miner Oceana Gold tumbled 4.6 percent, utility Contact Energy fell 2.3 percent and Sky City Entertainment Group, the casino and hotel operator, shed 1.5 percent.

Freightways, the courier and data management company, led the gainers on the exchange, climbing 3 percent, while whiteware manufacturer and exporter Fisher & Paykel Appliances rallied 2.7 percent and retailer Warehouse Group added 1.5 percent. Telecom rose 1.8 percent after the nation's biggest telephone company appointed Auckland International Airport boss Simon Moutter as its new chief executive.

Elsewhere across Asia, India's benchmark Sensex was last trading down 1.5 percent, Indonesia's Jakarta Composite index fell 0.6 percent, Malaysia's KLSE Composite shed half a percent, Singapore's Straits Times lost 1.1 percent and the Taiwan Weighted average ended down 0.4 percent.

On Wall Street, stocks ended mostly higher on Friday, as investors cheered strong earnings from companies such as Microsoft, General Electric and McDonald's. Paring early gains, the Dow rose half a percent and the S&P 500 edged up 0.1 percent, while the tech-heavy Nasdaq posted a modest 0.2 percent loss.

by RTT Staff Writer

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