Hong Kong: Continued signs of trouble in the financial sector and worrisome economic data sent Asian shares to their lowest in more than six weeks on Wednesday , bolstering the dollar and other assets that shine in uncertain times.
Sterling continued it slide to a its lowest in more than seven years against the dollar, while the euro touched a six-week low. Oil futures gained on trading related to the transition towards a new front month contract.
Barack Obama became US president on Tuesday with a message of hope and resolve that has so far failed to sway investors. A measure of global stocks hit its lowest since 5 December, dragging stocks back towards the 5-year lows hit in late November.
“People still have expectations for his economic policies, but we know nothing concrete about them, so the market has no choice but to focus on the real economy and earnings,” said Yutaka Miura, chief technical analyst at Shinko Securities in Japan, regarding Obama’s inauguration.
US markets fell steeply on Tuesday after institutional money managers State Street Corp and Bank of New York Mellon Corp reported substantial losses on investments and sharply lower profits.
That was seen as evidence that US banking problems are extending beyond commercial and consumer lenders to companies that provide asset management as well as the back-office services - unglamorous but crucial to the financial system.
Other sectors such as auto makers are also running into trouble, as they encounter the worst global downturn in decades.
Export bellwether Singapore said on Wednesday it was in the midst of its worst ever recession after reporting the nation’s economy shrank more than expected in the fourth quarter.
The MSCI index of Asia-Pacific stocks outside Japan fell for a second consecutive session, trading down 1.2% by 8:05am and earlier hitting its lowest since 8 December. The index is now down about 10% for the year.
Shares in Singapore’s main index dropped 2%. Other major indexes, including in South Korea, Hong Kong and Australia fell 1-2% each.
Resources firms are also under threat as commodity prices slide. BHP Billiton Ltd is cutting its workforce and reducing nickel production, while an aluminium unit of mining group Rio Tinto is planning similar steps.
Global shares have also suffered this week. MSCI’s worldwide measure was down 0.3%, having hit earlier its lowest since 5 December. The index is now up 8% since its November lows, cutting into a rally that had peaked to a gain of 27% in early January.
Sterling, Euro suffer
Sterling continued its steep declines this week on concerns over losses in the European banking sector, while the euro is also suffering on fears about a broader recession.
Investors instead are moving towards the dollar and the yen, currencies that are seen as relatively safer.
The sterling fell as low as $1.3815, its lowest since mid-2001, in early trade and, at one point, sank against the Japanese currency to a record low of ¥123.95.
The euro fell 0.1% to $1.2892 after hitting a six-week low of $1.2845 on trading platform EBS.
Other assets seen as safe-havens benefitted as well. Japanese government bonds rose broadly, sending two-year yields down 0.5 basis point to 0.345%, the lowest in three years.
“The trend seems likely to be toward selling equities and buying government bonds,” said Junji Kojima, senior deputy manager for Sompo Japan Insurance Inc’s global securities investment department in Japan.
Gains in oil prices - related to the handover to March US futures contract as the front month - were kept in check but fears about weakening demand. Crude futures were last up 46 cents to $41.27 a barrel.