Asian stocks fell broadly on Tuesday, mirroring weak cues from Europe and the U.S. overnight after German Chancellor Angela Merkel indicated opposition to euro-area debt sharing before a crucial European summit later this week.
Risk aversion increased after Moody's Investors Services downgraded its long-term ratings on 28 Spanish banks, reflecting the reduced creditworthiness of the Spanish sovereign and the expectation that the banks' exposures to commercial real estate would likely cause higher losses. The announcement came on the same day that Spain formally requested European Union aid to help recapitalize its debt-laden banks.
Commodities such as copper and crude traded narrowly mixed and the euro hovered near a two-week low versus the dollar as investors braced for a disappointing outcome to the European summit starting Thursday.
Japanese shares fell for a third consecutive session on worries about potential contagion from Europe after Cyprus became the 5th eurozone state to seek bailout. Also, investors awaited a parliament vote on a plan which seeks to double the sales tax to 10 percent over three years in a bid to rein in the nation's snowballing public debt. The bill was approved by lower house after the market close. The benchmark Nikkei average fell 0.8 percent, while the broader Topix index shed 0.9 percent.
Export-oriented electronics and precision instrument manufacturers fell sharply, with Sharp and TDK losing about 3 percent each, amid the yen's rise against the U.S. dollar and the euro. Silicon wafer maker Shin-Etsu Chemical dropped 3.5 percent and tech major Tokyo Electron retreated 2.9 percent.
Financials also lost ground on concerns about potential fallout from Europe's worsening debt crisis. Resona Holdings slid 1.3 percent, while Nomura Holdings fell 2.1 percent. Nippon Electric Glass plunged 7.8 percent as it cut its first-quarter net income outlook.
China's Shanghai Composite index ended marginally lower, with bargain hunting in financial stocks after the previous session's steep declines helping limit the downside. Hong Kong's Hang Seng index rose half a percent, marking its first gain in four days, led by defensives.
Australian shares fell modestly on concerns about Europe's ability to resolve its debt crisis after Merkel reiterated her stance on euro-zone bonds and Moody's downgraded 28 Spanish banks to junk status. Both the benchmark S&P/ASX 200 and the broader All Ordinaries index fell about 0.4 percent each.
Media stocks were in focus, with Ten Network Holdings falling 2.9 percent after major shareholders Gina Rinehart and Lachlan Murdoch raised their stake in the company. Fairfax tumbled 3.5 percent after billionaire Gina Rinehart threatened to sell her stake in the media company if she is not offered board seats. NewsCorp. rose 2.4 percent amid reports that it is considering splitting into two companies.
Miner Rio Tinto lost a percent and BHP Billiton retreated 1.4 percent, but Fortescue gained 0.6 percent in reaction to an announcement that its founder and chairman Andrew Forrest has lifted his stake in the company. The big four banks ended narrowly mixed showing little change, investment bank Macquarie Group slipped half a percent, oil & gas producer Woodside declined 1.4 percent and retailer Wesfarmer dropped 1.1 percent.
Seoul shares fell for a fourth day in light trading, dragging the benchmark Kospi average down 0.4 percent to its lowest level since June 5 as investors turned skeptical that the two-day Brussels summit would yield any substantive measures to tame the continent's debt crisis. Oil refiner SK Innovation tumbled 3.6 percent. South Korea, which imports all of its crude, said that it has suspended oil imports from Iran from July 1 due to a European Union ban on insuring tankers shipping the oil.
KT Corp., the nation's largest phone and internet group by sales, climbed 3 percent on defensive buying. Heavyweight Samsung Electronics rose 0.6 percent on bargain hunting, snapping a three-day slide, while memory chipmaker SK Hynix added 0.2 percent. Samsung Engineering advanced 0.6 percent on news that it had bagged a 2.4 trillion won order in Kazakhstan to build a thermal power plant for Balkhash Thermal Power Plant.
New Zealand shares fell, dragging the benchmark NZX-50 index down about 0.6 percent to its lowest level since early March, as pessimism mounted that the EU summit starting on Thursday will not produce any concrete solution to the region's debt crisis. Fletcher Building extended declines, falling 1.7 percent to its lowest level since January, weighed down by "painfully slow" progress on the Christchurch rebuild.
NZ Refining tumbled 3.2 percent to hit a seven-year low, outdoor clothing and equipment manufacturer Kathmandu Holdings lost 2.9 percent and pay TV operator Sky Network Television fell a little over 2 percent, while national carrier Air New Zealand and children's clothing chain Pumpkin Patch rose about a percent each.
Elsewhere, India's benchmark Sensex was last trading 0.1 percent lower, reversing early morning gains, while Indonesia's Jakarta Composite index was up 0.6 percent. Singapore's Straits Times index was losing 0.3 percent, Malaysia's KLSE Composite edged down 0.6 percent and the Taiwan Weighted average eased 0.4 percent.
On Wall Street, stocks declined sharply overnight on pessimism the upcoming EU summit will unlikely deliver concrete steps to tame the debt crisis. News reports of continued differences among EU leaders over growth and fiscal discipline, a move by Fitch ratings to downgrade Cyprus' sovereign credit grade to junk status and the resignation of Greece's new finance minister because of ill health added to concerns about weaker global growth, overshadowing positive U.S. new-home-sales data . The Dow ended down 1.1 percent, the tech-heavy Nasdaq tumbled about 2 percent and the S&P 500 lost 1.6 percent.
by RTT Staff Writer
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