Japanese and Australian shares weakened Thursday as Moody’s Investor Service’s review of U.S. credit ratings for a possible downgrade prompted caution, pressuring financial stocks and some exporters.
Hong Kong stocks were mostly lower, although trading was choppy. Mainland Chinese stocks extended gains in the wake of Wednesday’s strong economic growth data and as overnight gains for gold and crude-oil prices spurred commodity-sector shares.
“Moody’s report will likely weigh on Asian markets in Thursday’s trading, in particular on insurance sector. One notch downgrade to Aa from Aaa is the most likely scenario, if Moody’s decides to take action after their review. Warning from Moody’s has prompted urgent call on the Congress to speed up their negotiation over raising the debt ceiling,” Cantor Fitzgerald analysts wrote in a report. Read full story on Moody’s warning.
Japan’s Nikkei Stock Average JP:NIK -0.64% ended the morning trading session 0.4% lower, South Korea’s Kospi KR:0100 -0.73% shed 0.6%, Australia’s S&P/ASX 200 index AU:XJO -0.85% traded 0.3% lower and Hong Kong’s Hang Seng Index HK:HSI -0.72% declined 0.3%.
China’s Shanghai Composite CN:000001 +0.14% added 0.2% and Taiwan’s Taiex inched up 0.1%.
The lackluster start came despite gains in U.S. stocks overnight after Federal Reserve Chairman Ben Bernanke indicated the Fed may once again step in to prop up the economy. Read full story on Bernanke’s remarks.
“The fiscal negotiations in [Washington] D.C. appear to have stalled, increasing risks of a late or limited increase in the debt ceiling. Most believe the negotiations are ‘politics as usual’ and that the debt ceiling will be raised just in the nick of time, but there is a non-trivial chance of an undesirable outcome,” Credit Agricole economists led by Hervé Goulletquer wrote to clients. Read more on the U.S. debt ceiling talks.
In Tokyo, stocks were pressured as an increase in risk aversion pushed the U.S. dollar below the ¥79 level after Moody’s action.
Nintendo Co. JP:7974 -1.90% NTDOF +1.82% fell 1.3%, Toshiba Corp. JP:6502 -1.19% TOSYY +3.18% lost 1.2%, and Toyota Motor Corp. TM +1.24% JP:7203 -1.34% dropped 0.9%.
The dollar USDJPY -0.4525% was buying ¥78.62 in Tokyo late morning trade, after hitting a low of ¥78.44 earlier in the day — its strongest level since the March 11 earthquake.
“As Japan’s economy is in the midst of a V-shaped recovery, we think FX intervention is unlikely in the near term. That said, we think the risk of further [yen] appreciation is low, as further Fed easing is unlikely owing to rising inflationary pressures,” analysts at Nomura wrote in a note to clients.
Many financial stocks declined around the region in the wake of Moody’s warning.
Shares of Mizuho Financial Group Inc. MFG +0.91% JP:8411 -0.76% shed 0.8% and Sumitomo Mitsui Financial Group Inc. SMFG +1.97% JP:8316 -1.42% declined 1.4% in Tokyo. Macquarie Group Ltd. AU:MQG -3.64% MQBKY +2.60% shed 3.5% in Sydney, and Korea Life Insurance Co. and KB Financial Group Inc. KB -0.32% dropped 1.3% and 1%, respectively, in Seoul.
Chinese financials traded in Shanghai and Hong Kong also came under selling pressure. Bank of China Ltd. BACHY +1.51% CN:601398 +0.69% HK:3988 -2.23% lost 2% and China Construction Bank Corp. CICHY +2.37% HK:939 -1.48% CN:601939 +0.41% dropped 1.3% in Hong Kong; in Shanghai, they gave up 0.3% and 0.2%, respectively.
But resource-sector stocks led the market higher in Shanghai, where Jiangxi Copper Co. JIXAY +5.69% HK:358 +1.87% CN:600362 +2.86% jumped 3.2%, and gold miner Zijin Mining Group Co. HK:2899 +5.05% CN:601899 +5.70% ZIJMY 0.00% soared 5.9%. The advance came after gold futures closed at a record level on Wednesday, with crude-oil prices also gaining. Read full story on gold prices.
News Corp. AU:NWS +2.92% NWS +1.74% tracked 5.4% higher after withdrawing its $14 billion bid for the 61% of British Sky Broadcasting PLC UK:BSY +1.95% it doesn’t already own. Shares in rival Fairfax Media. Ltd. AU:FXJ -4.21% FFXLY 0.00% shed 4.7%.
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But Australian retailers retreated after a surprise profit warning by high-end department store David Jones Ltd. AU:DJS -16.50% DJNSY 0.00% , which sent the stock plunging 15.6%.
In the broader Australian retail sector, Myer Holdings Ltd. AU:MYR -5.28% lost 4.9%, and Harvey Norman Holdings Ltd. AU:HVN -4.56% HNORY 0.00% shed 4.2%.