Asian markets down after bleak Fed chief comments

Asian stock markets sank Wednesday after Federal Reserve Chair Ben Bernanke offered a sobering assessment of the US economy’s growth prospects.

Oil prices hovered near $98 a barrel, while the dollar dropped after Bernanke offered no new steps to stimulate growth despite saying the US economy had weakened in recent weeks and was undergoing an unexpectedly slow recovery.

Japan’s Nikkei 225 index dropped 0.4 percent to 9,404.53 as export shares slid on a strengthening yen. Honda Motor Corp. lost 1.3 percent. Consumer electronics giant Sharp. Corp. slipped 1.4 percent.

Nintendo Co. shares plummeted 6.2 percent, a day after the Japanese gaming giant unveiled the Wii video game console’s successor.

South Korea’s Kospi index dropped 1.4 percent to 2,070.26, with heavy industrials incurring losses on fears of a global economic slowdown. Hyundai Heavy Industries Co., South Korea’s leading shipbuilder, plunged 6.5 percent.

Australia’s S&P/ASX 200 lost 1 percent to 4,523.60, with energy shares losing ground as oil prices dropped. Energy Resources of Australia Ltd shed 2.8 percent, while oil and gas producer Woodside Petroleum fell 2.5 percent.

Hong Kong’s Hang Seng dropped 0.9 percent to 22,658.60. Benchmarks in Singapore, Taiwan, and mainland China were also down, while those in New Zealand and the Philippines rose.

“The financial markets are becoming quite concerned about the evident slowdown in global manufacturing activity,” Bank of America Merrill Lynch said in a research note. “However, it is unclear if this slowdown is something material, or just transitory, stemming from a one-time supply shock due to Japanese earthquake.”

In Washington on Tuesday, Bernanke said the US economy had not grown as quickly as had been expected so far this year. He said growth has been held back by higher gas prices and disruptions of industrial supplies from Japan following the March 11 tsunami and nuclear disaster there.

Bernanke expects the economy to pick up in the second half of the year, but he acknowledged that the pace of the growth remains “frustratingly slow from the perspective of millions of unemployed and underemployed workers.”

Some investors had been hoping Bernanke would announce additional measures to support the economy.

Major indexes fell after it became clear that Bernanke was not wavering from his view that the US economy is growing gradually and does not need more stimulus. The Fed’s $600 billion bond-buying programme, which is aimed at keeping interest rates low, is ending at the end of June.

Wall Street stocks have swooned since late April because of concerns that the US economy is stalling from a combination of high gas prices, weaker than expected hiring and a slowdown in manufacturing.

The Dow has fallen nearly 500 points over the last five days. The S&P remained below the psychologically important level of 1,300 for the second straight day and closed at its lowest level in two and a half months.

The Dow Jones industrial average lost 0.2 percent to close at 12,070.81. The Standard and Poor’s 500 dipped 0.1 percent to 1,284.94. The Nasdaq composite shed less than 0.1 percent to 2,701.56.

Benchmark crude for July delivery was down 49 cents to $98.61 in electronic trading on the New York Mercantile Exchange. The contract settled at $99.09 per barrel on Nymex on Tuesday.

In currencies, the euro fell to $1.4653 from $1.4693 late Tuesday after Bernanke’s speech. The dollar weakened to 79.91 yen from 80.08 yen.-By Pamela Sampson

 

Category: Stocks