Spanish woes hit sentiment

Asian markets mostly fell yesterday as fears about Spain’s surging borrowing costs replaced the previous day’s optimism over Greece’s election, while G20 leaders struggled to soothe dealers’ nerves.

Regional shares staged a strong rally on Monday as investors cheered a victory by pro-bailout parties in Greek elections at the weekend. However, the rally faded as traders’ attention moved to deepening troubles in Spain, where the yields on benchmark 10-year bonds rocketed to a record 7.13 percent.

Tokyo’s Nikkei 225 Index lost 0.75 percent, or 65.15 points, to 8,655.87 yesterday.

“The eurozone situation is far from over amid worries over the financial health of Spanish banks as the amount of non-performing loans in hand mounts,” Rakuten Securities senior market analyst Masayuki Doshida told Dow Jones Newswires.

In Shanghai, shares closed lower. The composite index ended down 0.66 percent. or 15.26 points, to 2,300.80.

“The initial euphoria induced by positive results from the Greek elections were short-lived,” Everbright Securities analyst Zeng Xianzhao told Dow Jones Newswires.

Sydney shed 0.33 percent, or 13.6 points, to 4,123.3 and Seoul was also almost unchanged, edging up just 0.06 points to 1,891.77.

HONG KONG: Shares ended flat yesterday, reversing earlier losses caused by concerns over Spain after its borrowing costs surged to a record high. The benchmark Hang Seng Index dipped 11.14 points to 19,416.67.
“Investors are wary of making any big bets,” said Ben Kwong, chief operating officer at KGI Asia, adding that while Greece’s election provided a respite from recent losses, Europe’s debt woes remain unsolved.
“Funds have been staying away from stocks for a while, and there’s no reason why they would return now,” said Edward Huang, equity strategist for Haitong International Securities.

SINGAPORE: Southeast Asian stock markets gained yesterday, but renewed concerns over the eurozone trimmed volumes.
Optimism over a possible solution to Greece’s debt crisis eroded as concerns over Spain’s borrowing cost hit investor appetite for risky assets.
“Markets are still likely to remain choppy for a while,” said Chang Chiou Yi, a regional strategist at CIMB-GK Research.
Singapore’s benchmark Straits Times Index climbed 0.64 percent, or 18.19 points, to 2,842.41.
Olam gained 4.26 percent to S$1.96 and United Overseas Bank rose 1.38 percent to S$18.35.

KUALA LUMPUR: Share prices on Bursa Malaysia closed firmer yesterday, bolstered by buying interest in blue-chip stocks despite the retreat on most regional markets, dealers said.
Gains in consumer and banking stocks pushed the FTSE Bursa Malaysia KLCI (FBM KLCI) to cross the important 1,590 level and closed 12.25 points higher at 1,594.98.
A dealer said although most regional markets were lower on recurring concern that the eurozone crisis is far from over, European and US equities trended higher on positive sentiment over the Spanish debt auction and a meeting of the US Federal Reserve later yesterday.
Gainers thumped losers 467 to 264, while 300 counters were unchanged, 519 untraded and 13 others suspended.
Turnover softened slightly to 932.560 million shares worth RM1.459 billion from the 941.093 million units valued at RM1.637 billion.

In other markets:

* Taipei closed 0.11 percent, or 8.37 points, lower at 7,273.13.

* Manila closed 0.62 percent higher, adding 31.20 points to 5,081.61.

* Jakarta closed 0.54 percent, or 20.66 points, higher at 3,880.82.

* Bangkok rose 0.83 percent, or 9.68 points, to 1,173.09.

* Mumbai edged up 0.9 percent or 157.97 points to 16,859.80.

EUROPE: European equities edged higher yesterday, with weak German data bolstering expectations for market-friendly stimulus from European policymakers and the US Federal Reserve also eyed for possible action soon.

The pan-European FTSEurofirst 300 added 0.4 percent to 997.85 points by 1014 GMT while the Euro STOXX 50 index of euro zone blue chips gained 0.2 percent to 2,160.73.

In late morning trade, London’s FTSE 100 index climbed 0.83 percent to 5,536.64 points, after official data revealed a drop in British annual inflation.

Frankfurt’s DAX 30 climbed 0.41 percent to 6,274.45 points and in Paris the CAC 40 eked out a gain of 0.08 percent to 3,067.56. Madrid’s IBEX 35 jumped 1.27 percent.

AMERICA: Optimistic traders turned their focus back to corporate news from the US as banks and materials stocks led the market higher.The Dow Jones industrial average soared 95 points to 12,837, its highest close in a month.

Stocks rose sharply on Wall Street Tuesday as traders turned their focus back to corporate news from the US and hopes that the Federal Reserve will come up with a plan to jumpstart the economy. Banks and materials stocks led the market higher.

The Dow Jones industrial average soared 95.51 points to 12,837.33, its highest close in a month. Microsoft was one of the biggest gainers in the Dow. The stock jumped 3 percent after the company announced a new tablet computer called Surface to compete with the immensely popular iPad from Apple. Microsoft was up 86 cents at $30.70.

Stock traders are also latching on to recent signals from the Federal Reserve that the central bank may reveal plans to stimulate the economy at the end of its two-day meeting Wednesday.

“A good portion of today’s strong market action is from a hope factor that we’re going to get more easing from the Fed,” said Peter Cardillo, chief market economist at Rockwell Global Capital.

Economists say that even if the Fed does not act after its meeting, it will send a clear message that it is standing by to do so if needed.

Financial companies were among the best performing stocks as investors hoped for Fed action: Bank of America soared 4.5 percent, Citigroup gained 3.5 percent, JPMorgan Chase was up 2.2 percent and Morgan Stanley rose 3 percent.

Bank investors were also pleased to learn that a federal housing agency will clarify the process under which home lenders are forced to buy back soured home loans. The buybacks have cost banks billions of dollars. The uncertainty surrounding how much loans they will have to repurchase from the government has led them to reduce lending.

The agency’s statement comes just as the housing market is showing signs of healing. American builders broke new ground on more single-family homes in May and requested more permits to build homes and apartments than they have in the past three and a half years.

The Commerce Department also said April was much better for housing starts than first thought. The government revised the figures up to 744,000, the fastest building pace since October 2008.

Material stocks rose on the prospect of demand from home construction. US Steel rose over 9 percent and Freeport-McMoran Copper rose over 3 percent.

In other trading, the Standard & Poor’s 500 index rose 13.20 points to 1,357.98. Seven of the 10 industry groups in the S&P rose. The technology-heavy Nasdaq composite index rose 34.43 points to 2,929.76. The Dow Jones Utility average touched the highest level since August 2008 before closing slightly lower.

In Europe, borrowing costs eased for Spain: its benchmark 10-year bond yield fell below the key 7 percent level to 6.99 percent.

Spain raised $4.28 billion in an auction of 12- and 18-month bills, more than analysts had expected. However Spain’s cost to raise the money skyrocketed. The Spanish government had to pay an interest rate of 5.07 percent for the 12-month bills, up sharply from 2.98 percent at the last such auction on May 14.

Still, investors were heartened to see that people were willing to lend Spain money.

“Even though it cost Spain dearly and yields rose to a record, the fact is that it was not shut out of the markets,” said Cardillo.

Major European stock markets rose: Spain’s IBEX 35 index rose 2.7 percent. Germany’s DAX added 1.8 percent and France’s CAC-40 rose 1.7 percent.

The dollar and Treasury prices fell as traders moved money out of low-risk assets. The dollar fell about a penny against the euro to $1.27 and the yield on the 10-year Treasury note rose to 1.62 percent from 1.58 percent late Monday.

Benchmark Currency Rates

	USD	EUR	JPY	GBP	CHF	CAD	AUD	HKD
USD	–	1.2666	0.0127	1.5718	1.0546	0.9810	1.0169	0.1289
EUR	0.7895	–	0.0100	1.2409	0.8326	0.7744	0.8030	0.1017
JPY	78.9800	100.0700	–	124.1230	83.2770	77.4760	80.3240	10.1780
GBP	0.6362	0.8058	0.0081	–	0.6710	0.6241	0.6471	0.0820
CHF	0.9483	1.2010	0.0120	1.4905	–	0.9303	0.9645	0.1222
CAD	1.0194	1.2910	0.0129	1.6022	1.0751	–	1.0368	0.1314
AUD	0.9832	1.2453	0.0125	1.5454	1.0370	0.9645	–	0.1267
HKD	7.7591	9.8270	0.0983	12.1957	8.1823	7.6111	7.8917	–

 

Category: FinanceAsia