Asian stocks drift lower, dollar dips

Asian stocks drift lower, dollar dips

Singapore: Asian stocks fell and the US dollar dipped against major currencies on Thursday, pressured by doubts over the US government’s proposed $700 billion bailout plan and worries about the economic fallout from the crisis.

Gold gained, rising towards Tuesday’s seven-week high, and short-term government debt prices climbed on concerns the US bank rescue may be insufficient to deal with the turmoil.

Crude oil futures held steady near $105.70 per barrel.

The euro rose 0.6% from late US trade to around $1.47 while the dollar index, which tracks the currency’s performance against six major currencies, dropped 0.5%. The dollar fell slightly against the yen.

“The bailout offers some respite for the financial sector but does little to change the economic outlook, which continues to deteriorate," said Dwyfor Evans, currency strategist at State Street Global Markets in Hong Kong.

Warren Buffett’s $5 billion bet on Goldman Sachs and the Federal Reserve’s new currency swap lines with more central banks helped restore some investor confidence in the dollar, but the buying interest was still limited by worries about the US economy, analysts said.

Uncertainty about the $700 billion bailout plan weighed on US stocks, knocking the Dow Jones industrial average and the broader-based S&P 500 index by 0.3% and 0.2 % respectively.

Asian markets picked up Wall Street’s cue.

The MSCI index of Asia-Pacific stocks outside of Japan fell 0.6% , though it remained well above a two-year low hit last Thursday.

Japanese shares also lost ground, with the Nikkei average falling 0.8%.

The US bailout package unveiled late last week triggered a temporary rally in global stocks but concerns over when Congress will approve the plan and uncertainty about its final form quickly eclipsed that optimism.

Bush administration officials warned an angry Congress on Wednesday that the US financial system would sink into Great Depression-style chaos unless it passed the bailout plan.

President Bush added his voice to the warning, saying an economic disaster loomed if Congress failed to act swiftly.

A bleak assessment of the US economic outlook from Fed Chairman Ben Bernanke on Wednesday bolstered the view the US central bank will lower its benchmark interest rates again by year-end.

The Fed cut its benchmark federal funds rate to 2% from 5.25% in a series of moves starting in September 2007 after the global credit crisis blew up.

Short-term US Treasury debt was in demand, suggesting funding needs once again have moved to the forefront of investors’ minds. The yield on the 1-month bill slipped to a mere 10 basis points, down from 12 basis points late in New York on Wednesday.