Hong Kong: Asian stocks fell, led by financials, and the US dollar rose on Wednesday on scepticism about a new plan from Washington to heal the banking industry that could cost as much as $2 trillion.
Details were in short supply about the US Treasury’s revamped rescue plan for financial institutions, sending disappointed investors searching for safety in assets such as gold after Wall Street dove 4% overnight.
A $838 billion economic stimulus bill passed the US Senate but faced further congressional dealmaking that could stretch into next week before it becomes a law.
With trade protectionism a creeping fear in Europe and exports in Asia collapsing, malaise sank into markets and weighed on commodity prices.
“It’s just a matter of trying to identify how deep an impact the global situation is going to have domestically, and unfortunately the picture going forward for all of us still remains quite unclear,” said Jamie Spiteri, manager of institutional sales at Shaw Stockbroking in Australia.
The MSCI index of stocks in Asia Pacific outside Japan slid 2.4%, down for a second day. Japan’s markets were closed for a public holiday.
South Korea’s KOSPI fell 1.7%, with shares of Shinhan Bank and Woori Bank were among the heaviest drags on the index.
Hong Kong’s Hang Seng dropped 3.25%, and was the biggest decliner in the region after it snapped a five-day winning streak. Shares of index heavyweight HSBC, Europe’s biggest lender, were down 4.5%, one of the largest percentage losers in the index.
Regional stocks had risen some 9% in the last two weeks, largely ignoring a raft of negative news, on optimism about the White House bank rescue and on hopes that falling global industrial output may be close to bottoming out. But those hopes were fizzling quickly.
The US dollar extended a broad rally from overnight. The euro was down 0.3% to $1.2873 but rose 0.4% against the Swiss franc
Gold was steady at around $912.60 an ounce after jumping more than 2% overnight as market volatility increased, while copper traded in Shanghai dropped 3%, ending six-day string of gains.
In the bond market, the benchmark 10-year US Treasury yield which moves in the opposite direction of the price, ticked up to 2.82% from 2.81% overnight. The yield tumbled 18 basis points overnight after the unveiling of the bank rescue plan.