Hong Kong: Asian stocks dropped for a second day on Tuesday and Japanese shares hit a one-month low, with investors fretting about the potential economic fallout if the swine virus outbreak becomes a full-fledged pandemic, and the results of US bank stress tests.
Futures on the S&P 500 slid nearly 1.5% and sparked further selling across Asia after The Wall Street Journal said that US regulators were pushing Bank of America Corp. and Citigroup Inc. to raise more capital after the initial results of the stress tests.
More countries have reported cases of the flu and some, such as Australia and South Korea, were testing for the virus. The World Health Organization raised its alert level to be a step closer to declaring the first flu pandemic in 40 years. But so far the deaths have not spread beyond Mexico, where the outbreak began and has killed 149 people.
Companies such as drug makers and producers of face masks got a boost on an expected increase in demand, while airlines extended losses on worries the swine flu will cause a sharp reduction in travel around the world.
Japan’s Chugai Pharmaceutical Co. Ltd, maker of influenza drug Tamiflu, rose 1.9%. Hong Kong’s Cathay Pacific Airways Ltd dropped 1%.
Market players cut back on holdings of riskier higher-yielding currencies and commodities for a second day, taking profits on winning bets since the beginning of March on hopes a global economic recovery was taking root.
“Active trade is limited as the market is trying to grasp how much swine flu could impact the global economy. We had finally begun to see a bottom for the global economy and that has been now ruined by pigs,” said Tsuyoshi Segawa, equity strategist at Shinko Securities Co. Ltd.
The MSCI index of Asia-Pacific shares outside Japan fell 2.4% after the S&P 500 shed 1% on Monday. The regional benchmark index is still up about 30% from a five-year low hit in early March.
Japan’s Nikkei average shed 2.7%, with disappointing earnings from shippers such as Mitsui OSK Lines Ltd and steel makers such as Nippon Steel Corp. slamming the market.
India led the losers in the region with a 3.3% drop, closely followed by South Korea’s 3% fall, while Hong Kong and Taiwan slid 1.9%. Australia and Singapore lost 0.6%, while China dropped 0.2%.
The Australian and New Zealand dollars—still among the highest-yielding of major currencies—hit one-month lows against the yen. The A$ was down 1.8% against the yen at around 67.30 yen and shed about 1.1% against the dollar to $0.70. The NZ$ shed 2.4% against the yen.
Aiko Hayashi in Tokyo contributed to this story.