Asian stocks fell sharply on Monday, as investors fretted about debt woes in Europe and slowing economic expansion in China. Europe's debt woes intensified after Spain's Valencia and Murcia regions asked for financial aid and Greek Prime Minister Antonis Samaras warned the country is facing economic hard times like that which the U.S. faced in the 1930s.
With a review of Greece's progress in meeting bailout conditions remaining still unfinished, the International Monetary Fund said it was no longer willing to extend aid payments to Greece, heightening the risk that the country may become insolvent as early as September.
It is already clear to the troika, comprising the European Union, IMF and the European Central Bank, that Greece will not reach the 120 percent deficit target under the fiscal adjustment program, Germany's Der Spiegel magazine reported, citing unidentified European Union officials.
There were also reports that the European Central Bank will stop accepting Greek sovereign bonds as collateral for refinancing operations pending a review by Greece's international lenders tomorrow.
Crude prices were down over 4 percent, copper futures fell about 3 percent and the euro extended losses to hit a fresh two-year low against the dollar.
Japanese shares fell for a second consecutive session as a jump in Spanish long-term borrowing costs to record highs stoked concerns that Europe's debt crisis is escalating. The benchmark Nikkei average ended 1.9 percent lower at a six-week low, while the broader Topix index finished 1.8 percent lower. The euro's renewed weakness against the yen weighed on exporters, dragging shares of companies like Sony and Ricoh down 7 percent and 4 percent, respectively.
Growth-sensitive stocks also came under heavy selling pressure, with China-linked Komatsu down 3.3 percent and trading house Mitsubishi Corp. falling 2.5 percent. Automaker Suzuki Motor fell almost 4 percent after a section of workmen at its Maruti Suzuki plant in India went on a rampage last week.
Domestic-demand driven railway companies such as Central Japan Railway and Japan Railway rose modestly on defensive buying.
China's Shanghai Composite index fell 1.3 percent to a more than 3-year low after Song Guoqing, an academic member of the People's Bank of China monetary policy committee, forecast that China's economic growth may slide to 7.4 percent in the third quarter. Hong Kong's Hang Seng index tumbled 3 percent, with Europe's largest lender HSBC Holdings, retreating 5 percent on renewed worries over debt problems in Spain and Greece.
Australian shares tumbled on growing concerns that the European debt crisis is worsening. Renewed speculation about a full-scale Spanish sovereign bailout raised concerns of a contagion risk from the region, pulling down the benchmark S&P/ASX 200 index and the broader All Ordinaries index down about 1.7 percent each. Big miner BHP Billionaires fell 2.6 percent, and Rio Tinto shed 3.5 percent, while smaller rival Fortescue slumped 7.1 percent. In the banking sector, Commonwealth, ANZ, NAB and Westpac fell between 0.7 percent and 1.3 percent.
Energy stocks also fell sharply following steep gains last week on higher oil prices. Woodside Petroleum lost 1.4 percent, while Santos and Oil Search tumbled about 3 percent each. Leighton ended 1.9 percent lower despite winning a $2.3 billion coal mine contract.
Woolworths bucked the downward trend to end a percent higher after the retail giant reported a stronger-than-expected 1.3 percent rise in same-store food and liquor sales in the fourth quarter. Rival Wesfarmer edged up 0.2 percent, but David Jones retreated 2.5 percent and Myer Holdings plunged 4.6 percent.
Producer price inflation in Australia accelerated at a faster-than-expected pace in the June quarter, mainly due to an increase in output costs for some agriculture produces and petroleum refining, data released by the Australian Bureau of Statistics showed. Prices for commodities at the final stage of production rose 0.5 percent quarter-over-quarter.
South Korea's Kospi average retreated 1.8 percent, as escalating fears over Europe dragged down exporters and banks. Tech shares Samsung Electronics and SK Hynix fell 2-4 percent, while Woori Finance Holdings lost 3.3 percent. OCI tumbled 3.5 percent after China initiated an anti-dumping probe on polysilicon imports.
New Zealand shares ended largely unchanged with a positive bias despite extremely weak regional cues. The benchmark NZX-50 index rose a marginal 0.05 percent, as gains in Freightways and Diligent Board Member Services offset losses in Australian dual-listed Goodman Fielder, which fell after it warned of more write-offs in the 2012 financial year.
Express package and information management company Freightways and software firm Diligent Board Member Services both rose about 1.8 percent each, while shares of Goodman Fielder slumped 6.1 percent post its disappointing trading update. Auckland International Airport gained 1.2 percent after it flagged an 11 percent increase in international arrivals in June year-over-year.
Elsewhere, India's benchmark Sensex was last trading down 1.4 percent, Indonesia's Jakarta Composite index was down 1.8 percent, Malaysia's KLSE Composite lost 0.4 percent, Singapore's Straits Times was losing 1.3 percent and the Taiwan Weighted average shed 1.9 percent.
On Wall Street, shares fell notably on Friday, weighed down by worries about Europe and amid lingering concerns about the outlook for the global economy. Investors also digested the latest batch of quarterly results from tech giants Microsoft and Google. The Dow fell 0.9 percent, the tech-Nasdaq slid 1.4 percent and the S&P 500 dropped a percent.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Market Analysis