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Asian Shares Fall After Spanish Downgrade

4/27/2012 5:34 AM ET

Asian stock markets swung between gains and losses before closing mostly lower on Friday, as Standard & Poor's downgrade of Spain's credit rating rekindled worries about the fragile state of the eurozone economy.

S&P downgraded Spanish credit ratings by two notches, saying that it expects further deterioration of the country's public finances amid economic contraction and the need to support banks. "We believe that the Kingdom of Spain's budget trajectory will likely deteriorate against a background of economic contraction in contrast with our previous projections," the agency said in a statement.

While renewed escalation in Europe's difficulties would clearly put the Asia and Pacific region's buoyant economic outlook at risk, Asian policymakers should be ready to shift gears and renew their tightening cycle as overheating pressures become evident, the International Monetary Fund said today in its Regional Economic Outlook report. In the absence of adequate policy responses, a deeper recession in the euro zone could cut two to five percentage points off growth in Asia, it warned.

A pair of mixed U.S. economic reports also revived concerns about slowing global growth. Investors took heart from encouraging news about U.S. pending home sales released overnight, but the uptick in weekly jobless claims raised concerns about whether the U.S. economic recovery will sustain.

Japanese shares fell in choppy trading, giving up early gains. The Nikkei average shed 0.4 percent, while the broader Topix index ended 0.7 percent lower. The benchmark Nikkei index rose over a percent early in the session after the Bank of Japan boosted its bond-buying scheme by a further 10 trillion yen to achieve its new 1 percent inflation target and support economic growth. The additional monetary easing measures were beyond market expectations, but the central bank extended the maturity of bonds it buys to three years from a two-year limit.

Among heavily weighted shares, Fanuc fell 2.2 percent, extending the previous session's 6.1 percent slump after its quarterly results. Canon lost 1.2 percent and TDK shed 2.5 percent. Nintendo tumbled 5.5 percent after the maker of video-game machines posted its first annual loss since becoming a public company. Japan Tobacco also slumped 3.7 percent after unveiling a share buyback.

Advantest soared 7.2 percent after the company posted a quarterly profit despite a fiscal-year loss. Softbank gained 3.1 percent after the mobile carrier reported a 65 percent surge in its annual profit on the back of strong demand for Apple's iPhone 4S. Kyocera rallied nearly 4 percent on saying that it expects to post a 16 percent rise in group net profit in the current business year ending March.

China's Shanghai Composite index eased 0.4 percent, as investors stuck with a cautious approach ahead of the long holiday weekend. China's financial markets will be closed on Monday and Tuesday for the Labor Day holiday. Hong Kong's Hang Seng index slipped 0.3 percent.

Australian shares posted modest losses, as mixed U.S. economic data and the Spanish downgrade prompted investors to take a cautious stance ahead of the weekend. Both the benchmark S&P/ASX and the broader All Ordinaries index ended down about 0.3 percent each, erasing early gains following a strong session on Wall Street overnight.

Retailer JB HI-Fi slumped 6.3 percent after saying that it expects its profit to fall in the current financial year despite growing sales. Harvey Norman and Myer Holdings lost 2-3 percent. Media stocks continue to fall, with Seven West Media losing one percent after issuing earnings downgrade earlier this week, while Ten Network fell 1.2 percent. Among those that gained, Macquarie Group jumped 3 percent as the investment bank forecast higher earnings after reporting a 24 percent fall in full-year profit.

Seoul shares rose, with the benchmark Kospi rising 0.6 percent to end a two-day losing streak, as positive earnings reports helped investors shrug off fresh concerns about the European debt crisis. Heavyweight Samsung Electronics rose 2.5 percent to a record high after the consumer electronics firm posted a record $5.15 billion quarterly profit on soaring sales of smartphones.

Among other tech shares, SK Hynix rallied 3.1 percent and Samsung SDI soared 7.5 percent, while LG Display and LG Electronics finished down 0.6 percent and 1.1 percent, respectively. Shipbuilder Samsung Heavy Industries rebounded 3.7 percent following recent steep losses and Kia Motors rose 1.4 percent on reporting a 26 percent rise in its first-quarter net profit.

New Zealand's benchmark NZX-50 rose 0.3 percent, with NZ Refining pacing the gainers after it won shareholder support to expand its refinery near Whangarei. Shares of the nation's only oil refiner climbed 3.6 percent, while clothing retailer Hallenstein Glasson, rural services firm PGG Wrightson and rubber goods and milking equipment manufacturer Skellerup Holdings rose 2-3 percent. Gold miner OceanaGold gained 1.8 percent after announcing first-quarter results.

Elsewhere, India's benchmark Sensex was last trading down 0.3 percent, Indonesia's Jakarta Composite index declined 0.4 percent, Malaysia's KLSE Composite fell 0.8 percent, Singapore's Straits Times index was little changed and the Taiwan Weighed average lost half a percent.

On Wall Street, stocks ended notably higher in thin trading overnight, as hopes for further stimulus steps from the Federal Reserve and a report from the National Association of Realtors showing a much bigger than expected increase in pending home sales in March helped to outweigh the negative sentiment generated by another disappointing jobs report and some tepid earnings reports. The Dow rose 0.9 percent, while the tech-heavy Nasdaq and the S&P 500 gained around 0.7 percent each.

by RTT Staff Writer

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