Stocks fell sharply across Asia on Wednesday, as news that Greece will hold a second election in June increased uncertainty over the future of the euro region. Investors fear that a Greek exit from the eurozone, a strong position against austerity measures and a disorderly debt default could lead to fatal consequences and make sovereign debt problems worse.
The consequences of even an orderly exit by Greece from the eurozone poses great risks and the spillover effects are difficult to assess, IMF chief Christine Lagarde said, clouding the global economic outlook.
Commodities came under heavy selling pressure and the euro tumbled to a fresh 4-month low against the greenback, as investors priced in a Greek exit from the 17-member euro zone. Italian and Spanish 10-year yields soared and speculation was rife that Moody's Investors Service will 'significantly' downgrade 21 Spanish banks within a week following a cut of credit ratings on 26 Italian banks on Monday.
Japanese shares fell, with the Nikkei average falling 1.1 percent to a three-and-a-half month low, after Greece said it will hold a fresh election in June, adding to concerns over Spanish banks and slowing global growth. Earlier in the session, the benchmark index fell below the 8,800 points mark for the first time since February 1. The broader Topix index of all First Section issues on the Tokyo Stock Exchange also finished 1.1 percent lower.
Among euro-sensitive exporters, Canon lost a percent and Nikon fell 3.3 percent. Other exporters such as Honda Motor, Toyota and Panasonic shed over 2 percent each on concerns over slower growth in China, Japan's biggest trade partner, after media reports suggested China's biggest four banks barely issued any new yuan loans in the first two weeks of May.
China-linked Komatsu fell 2.5 percent and Fanuc dropped 1.2 percent. Mizuho Financial Group gained 1.8 percent after it reported robust net profit for the fiscal year through March, largely due to an improvement in credit-related costs.
In economic news, core machine orders in Japan contracted a seasonally adjusted 2.8 percent from a month earlier in March, the Cabinet Office said today - falling for the first time in three months. The headline figure beat forecasts for a contraction of 3.5 percent following the downwardly revised 2.8 percent increase in February. However, on a yearly basis, core machine orders fell 1.1 percent - well shy of expectations for a gain of 4.4 percent after climbing 8.9 percent in February.
China's Shanghai Composite index fell 1.2 percent after the state-run Shanghai Securities News said combined net lending for the country's four biggest banks was almost zero in the first two weeks of May, extending the previous month's weak credit growth.
Hong Kong's Hang Seng index fell a whopping 3.2 percent as weak lending data for the mainland's big banks intensified fears about the slowing Chinese economy. HSBC Holdings,which has the biggest weighting in the Hang Seng Index, lost 2.4 percent.
Australian shares fell sharply, as weak leads from global markets amid deepening worries over Greece's political turmoil sapped appetite for risk. Both the benchmark S&P/ASX and the broader All Ordinaries index fell about 2.4 percent each. Resource stocks suffered heavy losses, with BHP Billiton, Rio Tinto and Fortescue falling 4-5 percent. Mineral sands producer Iluka Resources fell 2 percent and gold miner Newcrest slumped 4.3 percent.
In energy stocks, Oil Search, Santos and Woodside dropped 2-3 percent. ANZ fell 2.3 percent as the nation's third-largest lender unveiled plans to invest another A$300 million to support business growth in China. Westpac and NAB fell around a percent each, Commonwealth lost 1.7 percent and investment bank Macquarie Group tumbled 3.9 percent.
Toll Holdings plummeted 15.2 percent after the transport and logistics group said it expects underlying earnings to fall this fiscal year due to weakness in the global apparel sector. CSR declined 1.5 percent after the building products maker said Australia's housing construction industry will remain in the doldrums in the year ahead. Shares of Industrea soared 43 percent after General Electric said it would buy the mining equipment firm for about A$470 million.
South Korea's Kospi average tumbled 3.1 percent, extending losses for a sixth day, as mounting worries that Greece may default on its debts heightened global economic uncertainties. Blue-chip memory chip makers bore the brunt of the selling following reports that Apple Inc had placed orders with Japanese rival Elpida to buy mobile DRAM chips amounting to a whopping 50 percent of the volume produced at the bankrupt manufacturer's Hiroshima factory. SK Hynix plummeted 8.9 percent, while Samsung Electronics slumped 6.2 percent.
New Zealand shares lost ground, dragged down by pay TV company Sky Network Television after the nation's anti-trust regulator said it would launch an investigation into the company's content contracts with internet service providers that may be hindering competition. Shares of the News Corp-controlled
firm plunged 7 percent, while the benchmark NZX-50 index shed 0.6 percent.
Gold miner Oceanagold tumbled 3.5 percent as gold prices fell for a fourth consecutive session. Among heavyweights, Telecom fell 1.2 percent and Fletcher Building lost a percent, but Contact Energy added 1.5 percent. Exporter Fisher & Paykel Healthcare, which derives more than half of its revenue in U.S. dollars, climbed 3.9 percent, as the kiwi dollar fell to a 4 1/2-month low against the greenback.
India's benchmark Sensex was last trading down 1.7 percent on capital outflow worries after the rupee tumbled 67 paise to hit a record low of 54.46 against the dollar, succumbing to growing risk aversion due to the euro zone crisis and amid concerns about India's widening current account and fiscal deficits.
Elsewhere, Indonesia's Jakarta Composite, Malaysia's KLSE Composite and Singapore's Straits Times index all fell around 1.6 percent each, while the Taiwan Weighted average lost 2.2 percent.
U.S. stocks fell for a third consecutive session overnight, with the major averages ending at their worst closing levels in over three months, as news that Greece is heading for a fresh general election dented sentiment, overshadowing a batch of relatively solid economic data on home-builder confidence and activity in the New York manufacturing sector.
Consumer prices were flat in April and retail sales barely grew, in line with estimates. The Dow shed half a percent, the tech-heavy Nasdaq slid 0.3 percent and the S&P 500 dropped 0.6 percent.
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