Asian stocks fell yesterday Friday July 29 on growing concern that US lawmakers will not break a deadlock on a deal to avert a default by the world’s richest country.
Adding to downward pressure was news from Washington that a vote on a plan drawn up by Republican leaders had to be abandoned as they failed to convince hardline members of their own party.
With the clock ticking on the August 2 deadline, when the Treasury says it will run out of cash, global markets are looking to Washington, where the White House, Democrats and Republicans have failed to agree a deficit-cutting plan.
Tokyo ended 0.69 per cent, or 68.32 points, lower at 9,833.03 as data showing an improvement in industrial production was outweighed by disappointing earnings results, including from Nintendo, which suffered a huge sell-off.
Sydney lost 39.2 points to end at 4,424.6 and Seoul shed 22.64 points, to end at 2,133.21 while, Shanghai shed 0.26 per cent, or 7.05 points, to 2,701.73.
Politicians on Capitol Hill have been unable to reach a compromise deal that would allow the government to raise the debt ceiling above its current US$14.3 trillion.
Most experts agree that a default by the US could send seismic ripples through the global economy and lead to another downturn like that of 2008.
However, there is an expectation the deadlock will be broken, with the White House saying it is confident “sanity will prevail in the US Congress and they will reach a compromise”. The impasse hit Wall Street, with the Dow losing 0.51 per cent, the S&P 500 down 0.32 per cent and the Nasdaq flat.
HONG KONG: Stocks closed 0.58 per cent down yesterday amid growing fears that the US will default on its debt repayments.
The benchmark Hang Seng Index fell 130.49 points to 22,440.25 on turnover of HK$66.68 billion.
SINGAPORE: The Straits Times Index was little changed at 3,189.26 at the close. The gauge added 0.2 this week, extending its advance this month to 2.2 per cent.
Shares on the measure trade at an average 14.7 times estimated earnings, compared with about 15.6 times at the end of 2010.
These shares the most active: Hongkong Land Holdings gained 1.4 per cent to S$6.72, Hyflux Ltd slid 2 per cent to S$1.96 while Midas Holdings rose 1.8 per cent to 57 Singapore cents.
KUALA LUMPUR: The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) registered another week-on-week loss of 16.25 points for the week ended yesterday. It continued to stay above its critical support of 1,540 when it closed at 1,548.81 points.
The FBM KLCI fell on news of weaknesses on the regional stock markets on Monday. The FBM KLCI opened at 1,565.46 points before hitting a low of 1,558.51. It closed at 1,559.60 points, a day-on-day loss of 5.46 points.
In other markets:
* Taipei fell 1.40 per cent, or 123.02 points, to 8,644.18.
Taiwan Semiconductor Manufacturing Company shed 1.37 per cent to Tw$72.0 while computer maker Acer was 0.25 per cent down to Tw$39.95.
* Manila rose 0.46 per cent, or 20.83 points, to 4,503.63. Alliance Global Group gained 1.6 per cent to 11.58 pesos, Banco de Oro was up 0.4 per cent at 63.95 pesos and Philippine Long Distance Telephone added 0.8 per cent to 2,400 pesos.
* Wellington closed flat, edging down 1.16 points to 3,395.63. Telecom lost 1 per cent to NZ$2.63 while Mainfreight added 1.5 per cent to NZ$10.50.
* Jakarta fell 0.36 per cent, or 15.02 points, to 4,130.80.
VIETNAM: the VN Index tumbled 2.69 points to 405.7 pts with nearly half of listed shares losing points. HNX Index returned to fall after two gains, slipping to 69.55 pts with trading value of 235.69 billion dong.
EUROPE: European stocks markets slid yesterday as the US debt crisis deepened, while the euro dropped against the dollar after Moody’s ratings agency issued a gloomy warning over Spain.
Investors focused on the simmering global debt tensions and set aside company results from the likes of mining giant Anglo American, Anglo-Spanish airline IAG, pay-tv giant BSkyB and publisher Pearson.
Across Europe, London’s FTSE 100 index of top shares dropped 0.59 percent to 5,838.65 points in late morning deals, Frankfurt’s DAX 30 shed 0.80 per cent to 7,132.45 points and in Paris the CAC 40 index lost 0.88 per cent to 3,681.14.
AMERICA: On Friday, traders did something they rarely do: they sold what are considered to be the world’s safest short-term investments. Traders typically buy short term U.S. Treasurys on Friday because they want their money in a safe place in case something happens over the weekend to rattle markets.
The sell-off in short-term Treasurys shows that “the market is very concerned,” said Thomas Tzitzouris, head of fixed income research at Strategas Research Partners. “It’s not panic, but we are pre-positioning in case something goes wrong over the weekend.”
Stocks continued a weeklong slide after a dismal report on economic growth added to the anxiety. Major indexes erased some of their early losses on Friday after President Barack Obama said there were many paths to a compromise on raising the debt limit.
The Dow Jones industrial average fell 96.87 points, or 0.8 percent, to close at 12,143.24
The combination of bad economic news and growing worries about a possible debt default was evident in nearly every measure of investor confidence:
_ The Dow Jones industrial average had a sixth straight day of losses, a string that has erased 581.17 points.
_ All 10 industry groups in the S&P 500 stock index fell.
_ Gold rose nearly 1 percent to $1,631 an ounce.
_ A measure of stock market volatility, the VIX, rose 6 percent.
_ The cost to protect against a U.S. default within the next year reached a record high. The cost to insure Treasurys for one year jumped 54 percent this week.
Longer-term government bond prices rose as traders saw them as less likely to be affected by short-term positioning in Washington. The yield on the 10-year Treasury bond fell to 2.79 percent, its lowest level of the year. Bond prices move in the opposite direction of their yields.
The Standard and Poor’s 500 index lost 8.39 points, or 0.6 percent, to 1,292.28. The Nasdaq composite fell 9.87, or 0.4 percent, to 2,756.38
The Dow is still up 4.9 percent for the year, but it is down 667.3 points, or 5.2 percent, from its highest point of the year, which it reached on April 29.
Small-company stocks fared worse than the rest of the market as investors sold stocks they consider to be the most risky. The Russell 2000, which measures the smallest stocks on the market, fell 5.3 percent this week, worse than 3.9 percent decline in the S&P 500 index.
Two stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume was above average at 4.5 billion shares.
Benchmark Currency Rates USD EUR JPY GBP CHF CAD AUD HKD HKD 7.7941 11.222 0.1015 12.802 9.9218 8.1595 8.5682 - AUD 0.9097 1.3098 0.0118 1.4942 1.1580 0.9523 - 0.1167 CAD 0.9552 1.3754 0.0124 1.5690 1.2160 - 1.0501 0.1226 CHF 0.7855 1.1311 0.0102 1.2903 - 0.8224 0.8636 0.1008 GBP 0.6088 0.8766 0.0079 - 0.7750 0.6373 0.6693 0.0781 JPY 76.765 110.530 - 126.093 97.721 80.364 84.389 9.8492 EUR 0.6945 - 0.0090 1.1408 0.8841 0.7271 0.7635 0.0891 USD - 1.4399 0.0130 1.6426 1.2730 1.0469 1.0993 0.1283 Bloomberg