Asian stocks fell broadly on Monday, as investors grew cautious ahead of the upcoming European Union summit on Thursday and Friday where Greek leaders will attempt to re-negotiate the terms of an international bailout agreement.
According to a pre-summit document, the two-day summit in Belgium will see leaders discussing fiscal integration issues, especially the possibility of creating a union between banks and a joint deposit guarantee scheme, although success of the plans largely depend on whether EU leaders can overcome opposition to increasing the role of the ECB in supporting economic recovery.
Focus was also on Spain following reports that the country will formally apply for its long awaited banking bailout today. Documents released on Friday after an independent audit from consultancies Oliver Wyman and Roland Berger showed that Spain will carry out yet another stress test of its banks by October with a focus on seven lenders.
In news out of Greece, the new conservative-led coalition government said at the weekend that it would seek to repeal some taxes, halt layoffs and extend fiscal deadlines under its bailout program by at least two years. But Germany, Europe's biggest economy and a major contributor to international bailouts for Greece, told Athens to stop asking for more aid and instead move quickly to implement the reforms agreed to in return for previous bailouts from its European partners.
Tokyo stocks closed firmly in the red, as a pause in the yen's weakening ahead of Italian and Spanish auctions triggered profit taking in export-related shares such as TDK and Canon, which fell 4.1 percent and 2.5 percent, respectively. The Nikkei average fell 0.7 percent, extending the previous session's 0.3 percent loss, while the broader Topix index slid 0.8 percent.
NEC tumbled 3.2 percent after Tokyo tax authorities accused the company of concealing more than 10 billion yen in income over a three-year period to March 2010 via extra "compensation" paid to a Hong Kong company, when it exited the mobile phone business abroad. Renesas Electronics fell 2.7 percent on a Nikkei report that it is seeking to raise up to 50 billion yen by selling shares to U.S. investment firm Kohlberg Kravis Roberts & Co.
China's Shanghai Composite index fell a whopping 1.6 percent to a 23-week low on growing concerns that the slowdown in the domestic economy will likely continue through the second quarter. Hong Kong's Hang Seng index fell half a percent, with declines in mainland banking and energy stocks dragging the benchmark index lower for a third day running.
Australian shares lost ground, with miners pacing the declines after a UBS report warned of shrinking net incomes in the immediate years for BHP Billiton and Rio Tinto due to lower commodity prices and as the mining and carbon tax takes effect in less than a week. BHP fell 1.4 percent, Rio Tinto edged down 0.2 percent, smaller rival Fortescue lost 1.2 percent and gold miner Newcrest tumbled over 3 percent. The benchmark S&P/ASX 200 fell below the psychological 4000 point level early in the session before recouping its loss to end half a percent lower at 4,028.
Financials turned in a mixed performance, with Westpac down half a percent and Commonwealth losing 0.3 percent, while NAB edged up 0.1 percent and ANZ rose 0.3 percent. Shares of Perpetual soared 3 percent after the wealth manager outlined a plan to significantly reduce its costs over the next four years. Troubled surfwear retailer Billabong lost almost half its value in reaction to news of a $255 million capital raising and another earnings downgrade.
South Korea's Kospi average lost 1.2 percent, with weak U.S. and Chinese economic data and caution ahead of bond auctions in Italy and Spain weighing on the market. Among prominent decliners, market bellwether Samsung Electronics and memory chip maker SK Hynix plunged over 4 percent each, shipbuilder Hyundai Heavy Industries lost 1.5 percent, steelmaker POSCO shed 1.4 percent and Hyundai Motor, South Korea's largest automaker, slipped 0.8 percent.
New Zealand shares rose marginally in thin trading, led by strength in shares of would-be bank Heartland and market operator NZX after Fonterra Cooperative Group's farmers voted in favor of a scheme that allows them to trade co-op shares among themselves.
Heartland shares climbed 4.1 percent and NZX rallied 3.9 percent, while rural services firm PGG Wrightson tumbled 3.3 percent, carpet maker Cavalier fell 2.6 percent, courier and data management company Frieightways shed 0.8 percent, utility Contact Energy slipped 0.4 percent and construction firm Fletcher Building edged down 0.2 percent. The benchmark NZX-50 index ended up 2 points or 0.06 percent at 3,401.
India's benchmark Sensex was last trading down 0.3 percent, erasing an early gain, after the Reserve Bank of India announced a slew of measures to prop up the rupee. Elsewhere, Indonesia's Jakarta Composite index was down 0.8 percent, Singapore's Straits Times index shed half a percent and the Taiwan Weighted average fell 0.8 percent, while Malaysia's KLSE Composite was unchanged.
On Wall Street, stocks posted moderate gains on Friday, as an action by the European Central Bank to ease rules on the collateral requirements of banks to access ECB funding outweighed Moody's move to downgrade the credit ratings of 15 large banks.
Financial giant Morgan Stanley was among the companies downgraded, although its long-term debt rating was lowered by just two notches compared to expectations for three. The Dow rose half a percent, the tech-heavy Nasdaq climbed 1.2 percent and the S&P 500 added 0.7 percent.
by RTT Staff Writer
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