Asian Stocks Lose Early Gains

Markets in Japan, which is beset by feeble growth, political infighting, a strong currency and high government debt, initially barely blinked at Moody’s action, which was announced early on Wednesday.

In fact, the move came as little surprise, given the country’s economic challenges and the fact that Standard Poor’s had announced a similar downgrade in January.

But after rising in early trading, the Nikkei 225 index was 0.2 percent lower by the lunchtime break in Tokyo. The yen was little changed, trading at about 76.75 yen per U.S. dollar.

Moody’s move takes the rating to Aa3, from Aa2, with the ratings agency citing “large budget deficits and the build-up in Japanese government debt since the 2009 global recession” for its downgrade.

“Over the past five years, frequent changes in administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies,” Moody’s wrote in a statement.

The March 11 earthquake and tsunami and the subsequent nuclear disaster have delayed a recovery from the 2009 global recession and have aggravated deflationary conditions, Moody’s wrote, adding that “prospects for economic growth are weak, making it more difficult for the government to achieve deficit reduction targets.”

Elsewhere in the Asia-Pacific region, stocks were mixed. The key index in Australia was flat and New Zealand gained 0.5 percent, and the Shanghai composite index was 0.2 percent higher by midmorning.

Elsewhere, however, the markets slipped, ignoring the firm rally in the U.S. markets during the previous day. Analysts cautioned that the lingering uncertainties about the U.S. economy and European debt woes remain in place and are likely to produce more volatility in coming months.

The Straits Times index in Singapore and the Taiex in Taiwan were 0.8 percent and 1 percent lower, respectively, by midmorning. The Kospi in South Korea fell 1.3 percent, and in Hong Kong, the Hang Seng retreated 1.1 percent.

On Wall Street on Tuesday, the Dow Jones industrial average finished nearly 3 percent higher and the Standard Poor’s 500 rallied 3.4 percent, with investors apparently seeking out buying opportunities before Federal Reserve’s annual symposium in Jackson Hole, Wyoming, on Friday.

Investors also harbored hopes that the Fed chairman, Ben S. Bernanke, would announce fresh Federal Reserve support for the U.S. economy at the event.

Futures on the S. P. 500 were down 0.7 percent during the Asian morning, signaling that Wall Street may give up some of Tuesday’s gains when trading resumes Wednesday.

Gold, which had sagged sharply on Tuesday, climbed again Wednesday morning — a reflection that the precious metal’s appeal as a relative haven amid times of uncertainty remained undiminished.

Gold was trading at $1,852 an ounce by midmorning in Asia, up from about $1,830 earlier in the day.

Article source: http://www.nytimes.com/2011/08/25/business/daily-stock-market-activity.html?partner=rss&emc=rss