Asian shares fell across the board on Friday, snapping a three-day winning streak, as hopes for stimulus measures faded and China's surprise cut in interest rates raised concerns about a deluge of economic data due out this weekend.
Commodities from oil to copper tumbled and the 17-nation euro drifted lower against the dollar and yen, as no further stimulus from the ECB and the Fed coupled with mounting worries over Spain's finances prompted investors to pare some long positions ahead of the weekend. Fed Chairman Ben Bernanke disappointed investors looking for a third round of bond buying, but stated that the Fed would intervene if financial conditions worsen.
German Chancellor Angela Merkel urged Europe to take a gradual path towards political union as ratings agency Fitch downgraded Spain's long-term credit rating by three notches to 'BBB' reflecting higher than expected fiscal cost of restructuring and recapitalizing the Spanish banking sector, estimated to be around EUR60 billion or as high as EUR100 billion in a more severe stress scenario. The ratings agency cited a longer-than-expected slump and rising funding costs for the downgrade.
Japanese stocks tumbled, with the Nikkei average losing 2.1 percent to snap a three-session winning streak, as the yen's rise versus the euro on renewed worries over Spain's banking crisis gave investors a reason to lock in some profits ahead of the weekend. The broader Topix index finished 1.8 percent lower. Official data released today showed that Japan's economy grew faster than initially expected in the January-March quarter, but analysts warned of a slowdown amid the yen's strength and volatility in global markets in the wake of Europe's debt woes and global growth worries.
Heavyweight Fast Retailing plunged 4.9 percent and export-linked shares such as Canon, Honda Motor, Fujitsu and Sony fell between 1.7 percent and 5.3 percent. Major tech shares were also battered, pressured by the renewed strength in the yen. Tokyo Electron tumbled 3.5 percent and TDK lost 2.4 percent.
China-linked Hitatchi Construction Machinery, a maker of heavy equipment, slid 1.5 percent and Komatsu declined 2.2 percent as China's unexpected rate cut which came ahead of crucial reports due out this weekend led to worries about the state of the world's second-largest economy.
Financial shares also lost ground, with Mitsubishi UFJ Financial Group and Nomura Holdings losing about 2 percent each after Fitch lowered its investment-grade rating on Spain. Renesas Electronics soared 19 percent on a report that it has abandoned a plan to seek loan guarantees from major shareholders for a capital injection.
China's Shanghai Composite index slid half a percent to end at a 10-week low, as investors shrugged off an interest rate cut and grew cautious ahead of industrial output and consumer inflation numbers due out this weekend. Hong Kong's Hang Seng index fell 0.9 percent, dropping for a fifth consecutive week.
Australian shares retreated, with both the benchmark S&P/ASX 200 and the broader All Ordinaries index dropping about 1.1 percent each, as concerns over China's slowing growth and Germany's resistance to the introduction of eurobonds sparked risk aversion.
Financials led the declines, with the big four banks dropping 1-2 percent, while investment bank Macquarie Group lost 1.5 percent. Insurer Suncorp tumbled 3.2 percent following speculation yesterday that it has pulled off a deal with Warren Buffett's firm Berkshire Hathaway to secure reinsurance coverage in New Zealand. Miner BHP Billiton added a percent and Rio Tinto rose a modest 0.3 percent, but smaller rival Fortsecue shed 1.9 percent. Gold miner Newcrest Mining slumped 4.7 percent as the precious metal extended a sell-off from the previous session.
In economic news, Australia's trade deficit fell more than expected in April, though the balance has been in the red for a fourth consecutive month, the latest figures from the Australian Bureau of Statistics showed.
The balance on foreign trade in goods and services showed a shortfall of A$203 million in April after adjusting to seasonal variations. This was smaller than March's A$1.282 billion deficit and economists' forecast of a deficit of A$900 million. Exports of goods and services rose 3 percent from a month earlier, while imports value fell 1 percent to A$26.3 billion.
South Korea's Kospi average eased 0.7 percent, as lingering concerns over the European debt crisis and the absence of a firm commitment from major central banks to more stimulus weighed on sentiment, overshadowing China's first interest-rate cut since 2008.
Automakers Hyundai Motor and Kia Motor fell about 1.4 percent each, while China-linked steelmaker Posco rose 1.5 percent and Hyundai Steel added 2.8 percent. Meanwhile, the Bank of Korea today kept its benchmark interest rate unchanged at 3.25 percent for the 12th straight month, as easing inflation gave the central bank room to adopt a wait-and-watch approach.
New Zealand shares fell notably, with Telecom pacing the declines after the phone company issued a trading upgrade and unveiled plans to delist its NYSE-traded American depositary receipts in an attempt to bring down administration costs. Shares of the company fell 2.6 percent, dragging the benchmark NZX-50 index down 0.7 percent.
Outdoor clothing and equipment retailer Kathmandu Holdings tumbled almost 4 percent, Chorus, the network company spun off from Telecom, shed 1.9 percent and Fletcher Building, the nation's largest construction company, fell 1.3 percent, but building products maker Steel & Tube, which will be dropped out of the benchmark NZX 50 Index later this month, rose 2.4 percent.
Elsewhere, India's benchmark Sensex was last trading down 0.1 percent on profit taking, mirroring weak regional and European cues. Indonesia's Jakarta Composite index was down 0.4 percent, Malaysia's KLSE Composite slipped 0.3 percent, Singapore's Straits Times index lost 0.8 percent and the Taiwan Weighted average retreated 1.1 percent.
On Wall Street, stocks pared early gains to end on a mixed note overnight after Bernanke made no explicit reference to further easing measures despite an ongoing crisis in Europe and recent weakness in the labor market.
The initial strength on Wall Street was partly due to a positive reaction to news of a surprise interest rate cut by China's central bank. The Dow rose 0.4 percent, while the tech-heavy Nasdaq fell half a percent and the S&P 500 edged down marginally.
by RTT Staff Writer
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