Snapping a five-day rally, Asian stocks slid yesterday as concerns about the health of US banks resurfaced. European stock futures pointed to a higher open, with investors hoping the US results season will not be so dire.
The MSCI index of Asia Pacific stocks outside Japan fell 1.25 per cent, after briefly touching a six-month high on Monday. The index, now at 264.20, has not been able to clear 270 since October 2008. In Japan, shares of top bank Mitsubishi UFJ Financial Group were down 1.2 per cent and Shinsei Bank was off 4.4 per cent. The Nikkei share average slipped 0.3 per cent, with weakness in bank stocks winning out over strength in automaker shares. Hong Kong's Hang Seng index slid 1.1 per cent, led by HSBC stock, which dropped 1.7 per cent.
Adding to unease about the financial sector, the International Monetary Fund is expected to report in coming weeks that US bad assets could climb to as much as $3.1 trillion (Dh11.38trn), far more than the $2.2trn it had earlier forecast. The global banking system and financial markets are likely to remain on shaky ground, impeding hopes for economic recovery, until the mountain of bad loans, mortgages and financial derivatives, is cleared.
"The market's stance on banks had been too optimistic recently," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Tokyo. "Some large US banks have already passed stress tests, but others haven't, and given that results are coming up soon, this simply reignited investor uncertainty," he said.
Australia Bank dropped 2.3 per cent and Macquarie Group Ltd was down four per cent. The benchmark S&P/ASX 200 index fell 1.2 per cent after hitting a three-month high on Monday. Bank stocks were also under fire in Australia. Market observers said the IMF's view on toxic assets that caused caution for the market, while the benchmark Asia ex-Japan share index hits resistance level.