March 1, 2024

Asian Shares Fall, but European Indexes Rebound

But shares rebounded in Europe on Tuesday, after a sharp decline that was caused by more worries about the Continent’s sovereign debt, and a decision by Standard Poor’s, the credit ratings agency, to lower its outlook on the United States from stable to negative on Monday because of the country’s high budget deficits and rising government indebtedness.

The S.P. also cited the “material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013.”

The agency did not actually downgrade the American credit rating, and government officials in Japan on Tuesday voiced their support of the United States.

“The United States is tackling fiscal issues in various ways, so I still think U.S. Treasuries are basically an attractive product for us,” said Finance Minister Yoshihiko Noda of Japan, Reuters reported.

Still, S.P.’s statement sent brief jitters through the Treasury bond markets and spooked Wall Street, with the Dow Jones industrial average falling 1.1 percent Monday.

The markets in the Asia-Pacific region followed suit on Tuesday.

In Japan, which is still struggling amid the turmoil caused by the disastrous earthquake and tsunami last month, the Nikkei 225 index fell 1.2 percent to close at 9,441.03 points.

Taiwan dropped 0.9 percent, South Korea fell 0.7 percent lower, and in Australia, the SP/ASX 200 index closed down 1.4 percent.

The Hang Seng in Hong Kong sagged 1.3 percent, while the key index for mainland China dropped 1.9 percent.

In India, the Sensex index fell 0.3 percent during the afternoon.

Major indexes across Europe, however, were at least half a percent higher. The FTSE 100 in London was up 0.6 percent, while the DAX rose 0.4 percent. The CAC-40 in France was 0.76 percent higher.

Despite the fundamentally good economic backdrop in many of the fast-growing Asian economies, investors are increasingly fretting about how policy makers will act to contain the mounting inflation that is plaguing much of the region.

The United States’ fiscal deficit and debt problems “are not the U.S.’s alone,” analysts at DBS in Singapore wrote in a research note on Tuesday.

“The rest of the world needs to come to terms that the U.S. can no longer sustain its role the consumer of last resort for the global economy indefinitely. Two years after the exit from the 2008 global crisis, there will be greater urgency for emerging markets, especially those with large surpluses, to focus and rely more on domestic demand for growth,” the DBS analysts commented.

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