Hong Kong: Asian stocks fell on Tuesday, with Japan’s Nikkei hitting a three-month low, while the US dollar surged as investors scrambled for safety from deteriorating global economic conditions and volatile banks.
US stock futures fell 1.6%, indicating a weak open on Wall Street after a holiday on Monday, ahead of results from the world’s largest retailer Wal-Mart Stores Inc
European shares dropped more than 1% overnight on fears that losses in the financial sector will worsen and require more government aid, setting the tone for the Asian session.
Fiscal strains across Portugal, Ireland, Greece and Spain and severe financial weakness throughout emerging Europe all gave dealers more incentive to push the euro to a two-month low against the dollar and scoop up safe-haven US Treasury debt.
“The risk aversion trades are likely to keep making money - albeit amid volatility - until new measures are unveiled by governments and central banks in key economies,” said Dariusz Kowalczyk, chief investment strategist with SJS Markets in Hong Kong, in a note.
“Judging by the insufficient policy response so far, the near term market outlook remains negative.”
Countless economic stimulus packages and open promises to take more action by policymakers have so far all been met with disappointment by investors, with not even the $787 billion pledged by Washington making a dent in negative sentiment.
Exports across Asia have collapsed and the latest Reuters Tankan poll of Japanese manufacturers shows confidence remains mired near record lows
A more than 3% decline on Hong Kong’s Hang Seng index led the region down, with banks such as China Construction Bank and HSBC under pressure.
Japan’s Nikkei fell 1.45%, hitting its lowest since November 2008. Japanese bank stocks dropped, with shares of top lender Mitsubishi UFJ Financial Group down 4.3%, in the wake of a big loss at HBOS, a unit of Britain’s Lloyds
Losses in the technology and financial sectors dragged the MSCI index of Asia-Pacific stocks excluding Japan down 2.7%, falling further below its 50-day moving average. The technical indicator has capped the index for the past month.
The dollar shot higher as investors cut down risks and held on to liquidity amid global market volatility.
Even the yen, which has often gained during periods of heightened market volatility, slid against the US currency, though not as much as the euro.
Heavy euro selling tripped automatic sell orders planted just below $1.27 and the currency fell more than 1% to about $1.2640 its lowest since early December.