December 22, 2024

Renewed Worries About Europe Shake Asian Markets

The Nikkei 225 index closed down 2.3 percent, and in Australia, the S. P./ ASX 200 slumped 3.7 percent by the end of trading.

In Singapore, the Straits Times index was 2.6 percent lower by midafternoon, and in Hong Kong, the Hang Seng fell 4 percent. The Sensex index retreated 2.3 percent by early afternoon in India.

Key European markets also were expected to fall at the open.

The markets in mainland China, Taiwan and South Korea were closed for a holiday.

On the foreign exchange markets, the euro was trading at $1.356 to the dollar, having fallen sharply on Friday.

The slide in the currency and stock markets had been set off by the resignation of Jürgen Stark, a key German official at the European Central Bank, on Friday, which appeared to signal policy discord within the E.C.B., shaking already fragile market sentiment in Europe and the United States.

A much-anticipated jobs program speech by President Barack Obama, meanwhile, had done little to lift the global malaise about the prospects for U.S. economic growth.

The Dow Jones industrial average and the Standard and Poor’s 500 index both slumped 2.7 percent on Friday. In Europe, DAX in Germany plunged 4 percent, the CAC 40 in France lost 3.6 percent, and the FTSE 100 in Britain closed down 2.4 percent.

Asian markets had missed the selloff at the end of last week, but the worries about Europe caught up with them on Monday, as investors ignored unexpectedly strong import, export and bank lending data from China that were released over the weekend.

Exports from China in August were up 24.5 percent from a year earlier and imports climbed 30.2 percent. Local banks extended nearly 580 billion renminbi, or $90.8 billion, in loans, in the same month, which was more than analysts had expected.

The data were latest of a string of statistics showing that the world’s second- largest economy, after the United States, remains on a firm footing: Growth is slowing but at a modest pace, while the Chinese authorities have ample room to prop up the economy by opening the lending spigot, or lowering interest rates again, if needed.

The bank loans data released over the weekend, for example, showed that the central bank “is easing its control over credit growth as an attempt to address the funding difficulties faced by some sectors, especially the small- and medium-sized enterprises,” Yao Wei, a China economist at Société Générale in Hong Kong, commented in a research note on Monday.

As for the trade data, Qu Hongbin, co- head of Asian economics research at HSBC, said in a research note that the solid export growth suggested that external demand, especially from emerging markets, has held up well despite the turbulence in the global financial markets.

At the same time, he said, the import data showed that domestic demand remained strong.

“Going forward, China’s exports will likely soften in the coming months thanks to the likely slackness with developed markets,” Mr. Qu said. But he added that a “total collapse” of exports is unlikely.

Analysts at DBS in Singapore said, “For now, the global recovery story is still underpinned by leading indicators heading up in the U.S. and China.”

The resignation of Mr. Stark, however, “will keep investors extremely cautious this week,” they said.

Adding to the jitters were new doubts about the health of French banks and about Greece’s ability to stick with key austerity goals.

In Greece, the finance minister, Evangelos Venizelos, warned over the weekend that the economy would be likely to shrink 5.3 percent this year — a sharp downward revision from the previous forecast of a 3.8 percent contraction. This would make it even more challenging for Greece, which has been at the center of the continent’s debt woes, to pay its debts.

And in France, government officials braced for possible ratings downgrades by Moody’s Investors Service of France’s three largest banks, BNP Paribas, Société Générale and Crédit Agricole.

The biggest banks in Europe, especially in France, hold billions of euros’ worth of Greek bonds, and investors fear that even a partial default by Greece would sharply diminish the value of those assets, eroding already weak capital positions.

Article source: http://www.nytimes.com/2011/09/13/business/daily-stock-market-activity.html?partner=rss&emc=rss