Asian stocks resume slide after US rout

14:00, 06 March 2009
616 0

Asian stock markets resumed their downward slide Friday after Wall Street fell to its lowest levels in more than 12 years amid deepening fears about the fate of General Motors Corp. and major financial companies, according to AP. European markets were slightly higher in early trade.

The region`s retreat marked a return to the selling that had gripped global equities markets until a brief rally earlier this week on hopes China would announced major new stimulus measures.

Investors, already deflated after Beijing failed to deliver, were forced to grapple with a warning from General Motors that the struggling automaker may have to file for bankruptcy.

Along with growing uncertainty about the financial system, the news led to yet another rout in U.S. markets with banking stocks suffering some of the steepest drops. Citigroup Inc., stilling reeling despite billions of dollars in government aid, fell below $1 a share.

"You can buy Citi at the 99 cent store now," said Paul Schulte, a chief Asia equity strategist at Nomura International in Hong Kong. "It`s nauseating. We keep grasping at straws to find hope, and the markets keep punishing us."

Investors in Asai also were holding back ahead of what is expected to be an especially bleak U.S. employment report later Friday. Economists surveyed by Thomson Reuters/IFR predict the Labor Department will report that U.S. employers slashed 648,000 jobs in February — more than the 598,000 cut in January.

European markets bucked Asia`s falls in early trade. Britain`s FTSE 100 gained 0.5 percent, Germany`s DAX was up 0.4 percent and France`s CAC-40 was flat. Wall Street was headed for a lackluster open as stock futures traded mixed. Dow futures were off 31 points, or 0.5 percent, at 6,600 while S&P500 futures rose 0.9, or 0.1 percent, to 687.

Earlier in the day, every major Asian market traded into the red, though the losses were somewhat more muted than the sharp declines in the U.S. overnight.

Japan`s Nikkei 225 stock average fell 260.39 points, or 3.5 percent, to 7,173.10, while Hong Kong`s Hang Seng shed 289.72, or 2.4 percent, to 11,921.52. South Korea`s Kospi was off 0.3 percent at 1,055.03.

Elsewhere, Shanghai`s benchmark swooned 1.3 percent, Australia`s stock measure was 1.4 percent lower and Singapore`s key index shed 0.8 percent.

China has become a growing source of hope for many investors, helping buoy sentiment in Asia at a time when the region`s export-driven economies are hurting as demand dries up in industrial Western countries.

A day after Beijing stopped short of announcing new stimulus plans, the government said Friday it sees signs economic growth is recovering and is watching closely to determine whether it needs to expand its huge stimulus effort.

"It really depends on the changing situation to determine whether we need additional investment," Zhang Ping, the chairman of the country`s planning body, said in Beijing. He and central bank Gov. Zhou Xiaochuan said positive data showed Beijing`s policies were working so far.

Overnight in the U.S., the Dow fell 281.40, or 4.1 percent, to 6,594.44, its lowest close since April 1997.

Broader indicators also tumbled. The S&P 500 index dropped 30.32, or 4.3 percent, to 682.55, its lowest close since September 1996.

Sentiment was shaken after GM said auditors raised serious doubt about its ability to continue operating. It`s already received $13.4 billion in federal loans, and is seeking a total $30 billion from the government.

As long as global companies are afflicted by huge capital shortages, stock markets are likely to languish or grind downward, analysts say.

But how long it takes the world`s GMs and Citigroups to stop hemorrhaging money and raise more capital through government aid and other means is far from clear to anyone.

"I think the markets are going to continue to tread water," said George Kanaan, managing director at UBS in Sydney. "All the companies need to get more capital and that`s going to hold markets relatively down until we go through the process."

Robert Howe of asset manager Geomatrix in Hong Kong said the latest bout of selling was likely part of the second of three phases in a bear market that could last another year and a half.

Stocks that investors usually pour into during turbulent times — including utilities, staple goods and pharmaceuticals — were hit this week in both the U.S. and Asia, he said.

"Sentiment is very negative," Howe said. "What we`re seeing is defensive stocks are ... getting whacked, which tells us it might be close to the end of the capitulatory period of phase two."

Oil prices were higher in Asian trade, with benchmark crude for April delivery up 71 cents at $44.32 a barrel by late afternoon in Singapore on the New York Mercantile Exchange. The contract fell $1.77 overnight to settle at $43.61 a barrel

In currencies, the dollar fell to 96.70 yen from 98.20 yen. The euro traded higher at $1.2673 from $1.2548.

If you see a spelling error on our site, select it and press Ctrl+Enter