After six sessions of gains, the Asia-Pacific stocks ran out of puff today, dragging their key benchmark indices deep into the red, as investors moved to take advantage of the market's recent gains after S&P warned 15 eurozone members of possible credit downgrades due to the region's deepening debt crisis. Meanwhile, selloff pressure was further fueled after US economic reports, including ISM non-manufacturing for November and factory orders for October, came in weaker than expected.
U.S. credit rating agency Standard & Poor's put 15 countries in the euro area on negative credit watch, suggesting that these countries, including France and Germany, and other triple-A-rated euro-zone countries on review for potential downgrade within 90 days. The rating agency said that tightening credit conditions, disputes among officials on how to resolve the debt crisis, and a higher chance of falling into recession were the factors leading to such a move. The S&P warning left out only two of 17 countries that use the euro: Cyprus, whose bonds have near-junk status, and Greece, whose low ratings already suggest it is likely to default soon anyway.
The euro area's six AAA rated countries are among the nations to be placed on a negative outlook, and their credit ratings may be cut depending on the result of a summit of European Union leaders on Dec. 9, S&P said today in a statement.
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The U.S. non-manufacturing sector saw a slower rate of expansion and employment contracted in November, according to data released Monday by the Institute for Supply Management. The US ISM services index fell from 52.9 to 52.0 in November - the lowest level in almost two years (January 2010). Meanwhile U.S. factory orders fell for a second straight month during October as manufacturers struggle to build momentum during a slow economic recovery. October orders decreased by 0.4% from the prior month to $450.03 billion and September orders fell a monthly 0.1% after they were revised down from a previously estimated gain of 0.3%.
Market participants largely ignored positive news that German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a plan for imposing budget discipline across the region that requires changes to the European Union treaties and the International Monetary Fund approved a payment of 2.2 billion euros to Greece as part of a joint bailout with the European Union.
Turnover remain on the light side as many investors are likely to wait to assess developments at many important meetings in Europe. The European Central Bank's governing council holds its next policy meeting on Dec. 8 and European Union's leaders will meet on Dec. 9 in Brussels. Investors expectations are more from this week's ECB meetings and European Union summit, so everything points in the direction of something big coming out after these events.
Back to countries, the Sydney stocks widened losses throughout the day after a flat opening on Tuesday, weighing the benchmark All Ordinaries Index down 1.45% at 4,316.20, registering first fall in seventh consecutive day in row, as investors opted to cashed recent profit, on negative offshore cues.
The Reserve Bank of Australia cut its cash rate 25 basis points to 4.25%, marking the first back-to-back monthly cuts since April 2009. The central bank said that the inflation outlook afforded scope for a modest reduction in the cash rate and the Board will continue to set policy as needed to foster sustainable growth and low inflation over time.
The Statistics Bureau of Australia released data on Balance of Payments and International Investment Position, showing that the current account deficit fell seasonally adjusted A$1,023m (15%) to A$5,637m in the September quarter 2011. Exports of goods and services increased A$3,434m (4%) and imports of goods and services increased A$2,851m (4%). The primary income deficit fell A$420m (3%).
In Japan, the Tokyo stockmarket ended steep lower as selloff profit booking activities dominated whole day on Tuesday on renewed European debt woes. The benchmark Nikkei225 index tumbled 1.4% to 8,575.16, registering second fall in last seven sessions, as investors moved to take advantage of the market's recent gains, following yen strength against the euro and the US dollar and on S&P warning on euro nations for possible downgrades.
In the Nikkei225 index, major decliners in percentage term were MEIJO Holdings Co (-9.7%), Unitika (-8.7%), Taiyo Yuden Co (-6.2%), Toho Zinc Co (-5.4%), Yamaha Corp (-5.2%), Tosoh Corp (-4.8%), Nitto Boseki Co (-4.6%), MS&AD Insurance Group Holdings (-4.6%), Sumco Corp (-4.6%), and Fujikura (-4.5%). Buckling the trend, the Olympus ended 9.1% higher at 1,190 yen, registering sixth day on winning streak on news report that the camera maker investigative third-party panel would release a report after the market close, easing delisting concerns.
The Asian Development Bank said in its latest report released Tuesday that Japan's economy is forecast to bounce back from the effects of the recent natural disasters as supply chains are rebuilt, but the strong yen will likely hurt exports while domestic demand is likely to remain weak. ADB forecasted a contraction of 0.5% this year followed by a 2.5% expansion next year.
In China, the Mainland China stockmarket ended lower for third day on Tuesday, with the benchmark Shanghai Composite index declined 0.31% to 2,325.90, as investors continued offloading risky positions on jitter over slowing domestic economy after the Asian Development Bank on Tuesday slashed the growth forecast for the People's Republic of China to 8.8% in 2012 from 9.1% predicted in September. China is expected to grow 9.3% this year. Further fueling risk aversion selloff was due to S&P warning on Germany, France and 13 other eurozone members of possible credit downgrades.
According to CICC, there will be a soft landing for China's economy in 2012, with the growth rate falling to 8.4% while the contribution of consumption to GDP will rise.
Manufacturers paced the retreat on Shanghai's stock market, as the worsening European debt crisis painted a gloomy outlook of China's exports. China Garments plunged 3.4% to 8.61 yuan. Meili Paper Industry Co sank 0.6% to 5.17 yuan. Banks financials ended down on concern a property slowdown will hurt their growth. ICBC lost 1.9% to 4.20 yuan, Bank of China 1% to 2.93 yuan, and Agricultural Bank of China 1.5% to 2.56 yuan.
In Hong Kong, the HK share market ran out of puff today, dragging the benchmark Hang Seng index 1.24% down at 18,942.23, as investors opted to book recent gains on worry of deteriorating eurozone debt crisis after S&P put the sovereign credit ratings of 15 European countries on CreditWatch with negative implications. Turnover decreased to HK$47.4 billion from yesterday's HK$52 billion. HSBC dipped 1% to HK$61.7. China Mobile slipped 2% to HK$74.45. Esprit plunged 10.5% to HK$10.72 after the firm said its CFO resigned.
Among other Asian bourses, the Malaysia KLSE Composite fell 0.61% to 1,480.92. Singapore Strait Times index fell 0.6% to 2,749.24. Indonesia Jakarta Composite index was down 0.74% to 3,752.67. The South Korea KOSPI dropped 1.04% to 1,902.82. The Taiwan TAIEX index sank 2% at 6,956.28. Philippine PSEi slipped 0.21% to 4,282.77. India BSE Sensex closed today on account of Mohar
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