Markets softer, yen steadier on Fed doubts

Markets softer, yen steadier on Fed doubts

Sydney: Scepticism about plans by major central banks to tackle tight credit conditions kept Asian stock markets subdued on 13 December, while the low-yielding yen found a steadier footing after sliding overnight.

Oil and gold were off their best levels, taking a breather as initial optimism over the central banks’ action dimmed. US crude retreated below $94 a barrel, while gold eased towards $811, off a two-week high of $817 hit overnight.

“This move still does not seem to fundamentally solve the credit crunch," said Yutaka Mura, a senior technical analyst at Shinko Securities.

Investors were initially cheered by news the US Federal Reserve and counterparts in Europe, Canada and Britain had banded together to stem a mounting credit crisis, in their first coordinated action since terror attacks shut down US financial markets on 11 September, 2001.

The Bank of Japan also joined in saying it would ensure stable money markets by conducting appropriate operations such as supplying year-end funds.

But doubts the plan would completely solve the credit problems chipped away gains on Wall Street, where both the blue-chip Dow and tech-laden Nasdaq Composite Index ended just a touch higher.

Tokyo’s Nikkei fell 1.2% by the midsession, while MSCI’s measure of other Asia Pacific stocks eased 0.3% by 0230 GMT, still shaky after Wednesday’s 1.3% fall sparked by disappointment over the Fed’s modest 25 basis point rate cut.

The MSCI index has fallen 8.5% from a record high on 1 November, but is still up 36.2% this year, three times the gain on MSCI’s key world stock index.

Financial sag

Financial stocks were mostly lower, hit by news of possible fourth-quarter write-downs and loan losses for three of the major US banks including Bank of America.

Japan’s Mitsubishi UFJ fell 5% and Citigroup’s Tokyo stocks dropped 5.3 %. Australia’s Macquarie Group edged down 0.2%.

But investors bought some energy stocks on the back of a jump in oil prices overnight. Japan’s Inpex Holdings and Australia’s Woodside Petroleum both climbed nearly 1%.

Stronger bullion prices also lifted gold producers, with Newcrest Mining and Zijin Mining both up nearly 4%.

But Lihir Gold slumped 3.6% after the Papua New Guinea gold miner cut its 2007 production forecasts due to unplanned maintenance shutdowns.

Yen steadies

The yen was steadier after sliding overnight when the central banks’ plan helped lift appetite for riskier assets. Investors tend to sell the low-yielding Japanese currency to fund purchases of higher yielding but riskier assets.

“The liquidity measures will help fund markets to a degree, especially now when liquidity conditions are tight ahead of the year-end," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.

The dollar slipped below 112 yen from a one-month high of about 112.50 yen set on Wednesday, while the euro edged down to 164.70 yen from a one-month peak of around 165.30 yen reached overnight.

Against the greenback, the single European currency was slightly firmer from late New York levels at $1.4723

Demand for safe-haven government bonds waned slightly after a strong rally in the previous session. The yield on the benchmark 10-year Japanese government bond was flat at 1.510%, after falling 6.5 basis points on Wednesday.