US fears drag Asian stocks

GLOBAL MARKETS/ STOCK REPORT

Asian stocks declined after the Federal Reserve said US economic growth is slowing and Morgan Stanley said Japan may enter a recession.

Mizuho Financial Group and HSBC Holdings led banks lower on speculation that 25 basis point interest-rate cut by the Fed on Tuesday won't rekindle growth in the world's largest economy. Canon, BHP Billiton and PetroChina retreated on concerns that demand for electronics and raw materials will slump.

"Market sentiment has been shaken," said Yang Haeman, who manages the equivalent of almost $1 billion at NH-CA Asset Management in Seoul. "A US slowdown is already quite certain and investors now are also worried that this will result in a global slowdown."

The MSCI Asia Pacific Index fell 1 per cent to 163.73 as of 7:22 pm in Tokyo, set for its steepest drop since November 21. About five stocks fell for every two that gained on the benchmark.

Hong Kong's Hang Seng Index fell 2.4 per cent, the biggest drop among Asia's key stock gauges, and Japan's Nikkei 225 Stock Average lost 0.7 per cent to 15,932. Toyota Motor slipped after the yen strengthened against the dollar, reducing the value of exporters' overseas sales. Benchmarks retreated in all markets except South Korea.

EUROPE
Stocks fell in Europe, led by banks, exporters and mining companies, after the US Federal Reserve's comments on slowing economic growth in the country.

Barclays and BNP Paribas led banks lower in Europe.

The MSCI World Index lost 0.4 per cent to 1,613.49 as of 9:56 am in London, while futures on the Standard & Poor's 500 Index added 0.5 per cent.

Government bonds in Europe advanced today for a second day, while the euro rose against the dollar. The risk of European companies defaulting on their debt increased, according to traders of credit-default swaps.

Europe's Dow Jones Stoxx 600 Index lost 0.8 per cent. France's CAC 40 fell 1.2 per cent, and Germany's DAX slid 0.5 per cent. The UK's FTSE 100 declined 0.6 per cent.

US
US stock-index futures advanced as investors speculated Tuesday's losses following the Federal Reserve's interest-rate decision were exaggerated. Citigroup rose in Europe after the new chief executive officer, Vikram Pandit, announced a "front-to-back review" of expenses and productivity. JPMorgan Chase and Merrill Lynch also gained.

Standard and Poor's 500 Index futures expiring in December added 11.50 points to 1,489.60 as of 9:55 am in London. Dow Jones Industrial Average futures increased 95 points to 13,545.

Nasdaq-100 Index futures gained 14.75 points to 2,104.75.

"The Fed did what was expected," said Christian Gattiker, head of equity markets at Bank Julius Baer in Zurich. "I don't see where the disappointment comes from. I think markets will stabilize."