Asian stocks slide as global market rally fades
Asian stocks slumped into the red in early trade Monday as a global market rally fizzled out ahead of several key events that are set to test investor confidence in the ailing US economy, dealers said.
They said major markets in the region were down by some two to three percent as investors took their cue from Wall Street where shares lost ground Friday, snapping a strong two-day rally.
Sentiment remained fragile in the wake of last week's rollercoaster ride that saw global shares slump on fears of a US recession before rebounding sharply following a hefty US interest rate cut and an economic stimulus plan.
Tokyo was down 2.6 per cent by lunch while Hong Kong opened 3.2 per cent lower. Shanghai and Seoul both gave up 2.0 percent as Singapore fell 2.7 per cent.
"The market is fluctuating wildly," said Francis Lun, general manager at Fulbright Securities in Hong Kong.
"Investors don't have the appetite to buy stocks now."
Oil prices slipped in Asian trade on worries that a global economic slowdown will crimp demand for energy, while gold prices were higher as investors sought out safe havens amid the ongoing turbulence on global financial markets.
After last week's emergency US interest rate cut, many investors are hoping that the Federal Reserve will deliver another dose of monetary medicine at the end of a two-day meeting on Wednesday.
The fear is that stocks could resume their decline if the Fed fails to deliver the quarter-point reduction many traders are betting on.
Market views are also mixed about whether the central bank's efforts will be enough to prevent the US economy from slipping into recession.
"If the Fed makes another rate cut, the market will likely take the decision positively," said Mizuho Research Institute senior analyst Koji Takeuchi.
"But the market may turn cautious, as there are expectations that the forthcoming data may revive concerns about the US economy," said Takeuchi.
US President George W. Bush meanwhile is scheduled to deliver his annual State of the Union address later Monday, while key US jobs data due Friday will be keenly awaited for fresh clues on the health of the world's largest economy.
"Many investors are taking a wait-and-see attitude ahead of a series of events this week," said Won Jong-Hyuck, an analyst at SK Securities.
"All eyes will be on whether the upcoming US job market data will meet the consensus or not, given that the December data were a key culprit in the heightened volatility in global financial markets."
In New York, the blue-chip Dow Jones Industrial Average slipped 1.38 percent Friday to close at 12,207.17, capping a tumultuous week.
World oil prices fell in Asian trade Monday as market players remained wary about prospects for the global economy.
New York's main contract, light sweet crude for delivery in March, dropped 56 cents to 90.15 dollars per barrel.
On the foreign exchange market, the dollar took a breather as investors waited for the Fed meeting and Bush's State of the Union address, dealers said.
The dollar was steady at 106.78 yen in Tokyo morning trade from 106.76 in New York late Friday. The euro was slightly lower at 1.4666 dollars after 1.4680
"Currency markets are waiting to see the outcome of the Federal Reserve meeting and will take their cue from its impact on stock markets," said Kazuhiko Shibata, Dresdner Bank's Tokyo manager. (AFP)
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