February 23, 2024

Asian Stocks Fall After S.&P. Warning

Standard Poor’s, the credit ratings agency, lowered its outlook on the United States from stable to negative on Monday because of the country’s high budget deficits and rising government indebtedness. It 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.”

S.P. did not actually downgrade the U.S. credit rating, and government officials in Japan on Tuesday voiced their support of the United States, saying that U.S. securities remained extremely good quality.

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. In Europe, too, stocks fell steeply, dragged down by signs that the debt crisis in some of the continent’s periphery could be deepening.

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 was down 1.5 percent by the lunchtime break.

Singapore dropped 0.9 percent while South Korea was 0.8 percent lower. In Australia, the SP/ASX 200 index fell 1.3 percent.

The Hang Seng in Hong Kong sagged 1.4 percent by mid-morning, while the key index for mainland China was down 1.6 percent. In Taiwan, the Taiex fell 1.1 percent.

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.

Article source: http://feeds.nytimes.com/click.phdo?i=1ee1317a0292bb00c61ecae6105d178c

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