Tokyo: Asian stocks extended losses, partly dragged lower by a plunge in Hong Kong shares, and the euro fell on Monday on deepening concerns that the euro zone’s debt crisis will dampen global growth.
Worries that a weakening economy will hurt industrial demand hit commodities such as copper, which extended losses for a fourth session in a row after its worst quarter in nearly three years, and oil, which slid more than $1 earlier in the session.
Gold rose as investors abandoned riskier commodities, commodity-linked currencies and equities in favour of the safety of the precious metal and the dollar.
MSCI’s broadest index of Asia Pacific shares outside Japan fell 3%, slipping closer to a 16-month low hit late in September, while Japan’s Nikkei fell 2%.
Hong Kong’s Hang Seng Index slumped more than 4% in early trade to its lowest since May 2009, with financials and developers hit hard on fears of the potential impact of a property market correction.
“The October-December quarter begins today, so there is hope for domestic fund buying,” said Fujio Ando, senior managing director at Chibagin Asset Management in Tokyo.
“But right now the market’s focus is Greece’s problems and how Europe will address the situation, as well as US data this week that will show us more about the economy.”
Among the first set of clues to help gauge direction for the global economy in the fourth quarter is the US Institute of Supply Management index, a component of the broader Purchasing Managers index that is reported separately, due later on Monday.
As global stocks posted their worst quarter in nearly three years in July-September, and with mainland Chinese markets closed all week for national holidays, traders said volatility might rise with some funds seeking to capitalize on bearish sentiment in thin volume.
The euro fell to its lowest level in more than eight months at $1.3322 in early Asia trade as a government draft budget figures on Sunday showed Greece would miss a deficit target set just months ago in a massive bailout package.
Adding to the concerns over Greece, the German finance minister was quoted as ruling out a higher German contribution to the euro zone’s rescue fund than approved by parliament last week.
Euro zone finance ministers meeting later were expected to put pressure on Greece to implement agreed structural reforms and also discuss options for leveraging the European Financial Stability Facility (EFSF), the currency bloc’s bailout fund, to increase its financial firepower.
In commodity markets, Brent crude oil was down 1.04% to $101.69 a barrel, while US crude fell 1.36% to $78.12.
Gold extended gains, rising 0.6% to $1,632.30 an ounce, after ending the third quarter up 8% for its biggest quarterly gain of this year. Those quarterly gains came despite a steep drop from a record above $1,920 an ounce in September.
Some equity market players are seeing buying potential in the recent sell-off, saying any positive news could turn around the market after this week, when volume is expected to be thin during Asian trading hours due to the Chinese holidays.
“There is progress in Greece and the EFSF is still making progress -- they are making baby steps which is positive,” said Todd Martin, Asia Equity Strategist at Societe Generale.
“There are signs value players are buying into the market. Several catalysts could turn the market around,” he said.
While global markets have priced in a US double-dip recession, global contagion should be contained as long as Europe makes orderly progress on its problems, he said.
A fall in oil prices and a dip in long-term interest rates would be positive in spurring demand long-term.
US benchmark 10-year Treasury notes remained steady at 1.91% in Asia on Monday, after falling 10 basis points on Friday.