Asian stocks retreated on Tuesday on concerns the European debt crisis is worsening after Moody's Investors Service cut the European Union's outlook to "negative" from "stable", reflecting the increasing risks to member states such as Germany, France, the U.K. and the Netherlands which together account for about 45 percent of the EU's budget revenue.
Also, Andalusia became the latest Spanish region to request emergency funding from the country's central government, tempering hopes for additional stimulus measures ahead of a key meeting of the ECB's governing council on Thursday and the release of U.S. unemployment figures on Friday. Trading volume continued to remain low, as investors remained on the sidelines in the absence of overnight cues from Wall Street.
However, commodities rose and the euro traded near a two-month high against the dollar as investors cheered positive comments by ECB President Mario Draghi that the bank would be comfortable buying short term sovereign bonds with maturities of up to about three years to support struggling countries like Spain.
Japanese shares slipped marginally amid a lack of fresh trading cues, with many traders staying on the sidelines ahead of the ECB's monthly policy meeting. The Nikkei swung between gains and losses before ending down 0.1 percent, while the broader Topix index shed 0.3 percent. Japan Tobacco tumbled 4 percent on reports Russia will submit a law that bans smoking in public places to parliament in November.
Export-oriented automaker Suzuki Motor slid 0.6 percent and Daihatsu Motor lost a percent as the yen held firm against the dollar. Drug maker Astellas lost 0.9 percent on profit taking after rising sharply in the previous session on receiving the U.S health regulatory approval for its Enzalutamide drug, used for treating a type of late stage prostate cancer.
Sharp Corp jumped 12.4 percent amid reports that Hon Hai Precision Industry Co's chairman is demanding a management role at the company as part of an equity tie-up.
China's Shanghai Composite index fell 0.8 percent to its lowest level since Feb. 2, 2009 after Societe Generale cut its forecast for China's real GDP growth in the third quarter and Goldman Sachs Group Inc. cut its estimates for China's publicly traded companies. Hong Kong's Hang Seng index lost 0.7 percent to close at its lowest level in more than five weeks.
Australian shares fell notably, dragged down by banks, after the Reserve Bank of Australia kept its benchmark interest rates on hold, but warned of softer global economy that posed risks to the domestic economy. The monetary policy stance remains "appropriate", given the more subdued global outlook and expectations for a close-to-trend growth of the domestic economy, RBA Gov. Glenn Stevens said in the accompanying statement. Both the benchmark S&P/ASX 200 and the broader All Ordinaries index ended down about 0.6 percent each.
ANZ and Westpac led the decliners among banks, falling about 2 percent each, while Commonwealth and NAB ended down 0.7 percent and 0.8 percent, respectively. Fortescue Metal tumbled 4.2 percent after the miner cut its full-year capital spending forecast by 26 percent to $4.6 billion, citing the uncertainty created by tumbling iron ore prices. BHP Billiton shares rose half a percent and Rio Tinto added a percent.
Seoul shares edged down modestly, with the benchmark Kospi average losing 0.3 percent, as automakers came under selling pressure on concerns over third-quarter earnings. Meanwhile, expressing concerns over prolonged eurozone fiscal crisis, Finance Minister Bahk Jae-wan told an economics symposium in Seoul that the government will announce a stimulus package next week to support the export-reliant economy.
New Zealand shares rose modestly, led by retailers. The benchmark NZX-50 index edged up 0.2 percent. Shares of Warehouse Group, the biggest retailer on the exchange, climbed 3.2 percent ahead of its annual results due on Friday, while outdoor clothing retailer Kathmandu Holdings rose 2.2 percent ahead of its results on September 20. Pumpkin Patch, which posted better than expected earnings results last month, closed 0.8 percent higher.
?Guinness Peat Group, which now counts billionaire George Soros as a substantial shareholder, rallied 3 percent after the company said it would commence a share buyback this week. Insurance and financial services company Tower led the decliners, falling 3.3 percent, after the company downgraded its annual profit expectations, citing the impact of Christchurch earthquake-related claims. Heavyweights Telecom and Fletcher Building fell 0.8 percent and 1.2 percent, respectively.
Elsewhere, Indonesia's Jakarta Composite index edged down 0.3 percent and Singapore's Straits Times index was down 0.2 percent, while India's benchmark Sensex was moving up 0.2 percent and Malaysia's KLSE Composite edged up marginally.
U.S. markets were closed for the Labor Day holiday overnight. In Europe, investors shrugged off weak euro-zone and Chinese manufacturing data amid hopes that Draghi will give more details on the bank's bond buying plans at this week's policy meeting. Key benchmark indexes in Germany, the U.K. and France rose between 0.6 percent and 1.2 percent.
by RTT Staff Writer
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