Hong Kong: Asian stocks snapped a four-day winning streak on Friday and the yen and US dollar rose as investors retreated to safety with job losses accelerating globally while Washington scrambled to finalise a fix for banks.
Wall Street shares dove after a report said continuing claims for US unemployment were at a record high, while Japanese stocks tumbled 3% after data showed unemployment in the world’s second-largest economy at a near three-year high and industrial output plunging by a record 10 percent last month.
The New Zealand dollar, once favoured by investors because of its high yield, dropped to another six-year low after the country’s central bank governor said interest rates will likely have to be cut further, with swarming economic problems hurting almost every corner of the world. The comments came just a day after the central bank slashed its benchmark rate by 150 basis points.
The severely weak economic reports supported expectations that Japan’s economy shrank by a double-digit percentage on an annual basis in the last three months of the year. Focus later this evening will be on the fourth quarter US gross domestic product data.
“There is no sign of bottoming out. As industrial output posted a record drop, it is hard to expect a recovery anytime soon,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp in Tokyo.
The 3.3% decline on the day of Japan’s Nikkei share average led the region, with the index on track for a 8.8% fall in January. That would be the worst performance in January since 1997, according to Reuters data.
Toyota Motor Co stock was down 4.3% after a company source told Reuters operating losses for the fiscal year ending 31 March will likely be bigger than the 150 billion yen forecast by the top automaker.
Stocks in Asia-Pacific outside Japan were down 1.1% on Friday and 8.4% in January, according to an MSCI index. It was the first daily drop in the index in a week.
Hong Kong’s Hang Seng index fell 1.8%, led by a 5% drop in HSBC stock, which is being hounded by speculation about dividend cuts and the need for additional capital.
Hope is trounced
Some optimism trickled into markets earlier this week after the US Congress progressed on a $825 billion stimulus spending package and other efforts to ease the blow of a severe recession. Yet, the White House plan is expected to face formidable opposition in the Senate.
In addition, the fate of the banking industry was still up in the air, with government negotiations about a plan to separate bad assets at the banks hitting a snag, according to CNBC TV.
Downward pressure on equity markets lent some support to US Treasuries. The yield on the benchmark 10-year note, which moves in the opposite direction of the price, slipped to 2.83% from 2.88% late on Thursday in New York.
However, the yield was up 61 basis points in January, the biggest one-month rise since April 2004, with investors concerned about the amount of new borrowing needed to finance the government’s legion of rescue plans.
Despite the persistent selloff of US stocks and Treasuries, the dollar was a stalwart in January, strengthening 5.4% against a basket of major currencies. The currency’s deep liquidity and continued status as the world’s top reserve currency have acted like magnets for investors fleeing risks that have mushroomed throughout the financial crisis.
The euro fell 0.4% from late US trade to $1.2902 after European Central Bank President Jean-Claude Trichet warned overnight the ECB could push interest rates below 2% and data showed the biggest monthly jump in German unemployment in four years.
The dollar dipped 0.3% to ¥89.75 though month-end dollar demand from Japanese companies capped losses.