Hong Kong: Asian stocks fell for a third straight session on Tuesday as a continued retreat in oil prices below US $40 a barrel hit resource-related shares, while auto makers slumped after Toyota’s profit warning.
The uncertain economic outlook continues to bolster low-yielding but safer government bonds, as evidenced by the record US $38 billion of two-year notes sold by the US government on Monday for a historic low yield of below 1%.
Asian shares tumbled, with auto makers such as South Korea’s Hyundai Motor slumping 10% a day after Toyota Motor Corp announced its profit warning report for the year until end-March.
Resource-related stocks such as BHP Billiton also fell on worries that a deep global downturn will hit demand for commodities.
Shares in South Korea, Hong Kong, Taiwan and India fell between 2 to 3%.
European shares were also set to fall as worries over the global economy remain. Up next on the global data front is the final US gross domestic product figure for the third quarter, with the wait pressuring the dollar in Asian trade.
Shanghai’s main index fell almost 5% after China’s central bank on Monday trimmed interest rates by 27 basis points (bps), in a move that disappointed investors because it was smaller than more aggressive actions by other central banks.
“I believe the optimism that we had over the last month has pretty rapidly come to an conclusion,” said Tim Rocks, an equity strategist for Macquarie Securities in Hong Kong.
“The macro data is just truly awful, the Japanese export data on Monday was the most frightening thing that I have seen for a long, long time. The economic data just shouldn’t behave like this,” he said.
On Monday, figured showed Japanese exports plunging at the fastest annual pace on record in November.
The MSCI index of Asia-Pacific stocks outside Japan dropped 3%. Though the index is now well off a 5-year low hit in November, it remains down 54% for the year in the worst yearly slide in its 20-year history,
Trading was limited, with Japanese financial markets closed for a national holiday and many market players away from their desks before Christmas and other year-end holidays.
It has been a tough 2008 that has featured the collapse of Bear Stearns and Lehman Brothers, as well as an unprecedented wave of rate-cutting, stimulus packages and government support for the ailing financial sectors.
New Zealand’s economy contracted by the biggest amount in 8 years in the third quarter, reinforcing the case for more central bank rate cuts, data on Tuesday showed.
Australian shares ended the day 0.7% lower.
Oil prices extended their recent sharp falls, falling 51 cents to US $39.40 a barrel as investors worry that production cuts from oil cartel OPEC could take a while to come through.
The US is expected to confirm later in the day that the world’s largest economy contracted 0.5% in the third quarter, matching an earlier advance estimate.
The euro edged up 0.3% to US $1.3985, and also rose against the Japanese yen, up 0.3% to 126.22yen.
The dollar index, a gauge of the US currency’s performance against six major currencies, edged down 0.1% to 81.080.
However, most Asian currencies fell against the US dollar.
Economists at Goldman Sachs warned that the US would need ongoing fiscal support.
“The US economy needs not only a large package of fiscal stimulus in 2009, but one that provides substantial support beyond next year,” they said in a note to clients.