Published: Tuesday May 26, 2009 MYT 7:39:00 AM
Updated: Tuesday May 26, 2009 MYT 8:41:16 PM

Asia stocks lower Tuesday (update)

LONDON (AP) - World stocks fell Tuesday as investors worried that the recent rally may be overdone and were unsettled by the geopolitical tensions in Asia, where North Korea test-fired two missiles just a day after its nuclear test.

In European afternoon trading Germany's DAX 30 was 1.4 percent lower at 4,849.37 and Britain's FTSE 100 was down 0.9 percent at 4,325.09. France's CAC 40 fell 1.4 percent at 3,192.40.

Futures markets forecast a drop on the U.S. open. Dow industrial average futures were down 40 points at 8,220.00 while Standard & Poor's 500 futures were down 3.9 points at 881.00.

European shares followed Asia lower after North Korea, defying international criticism, followed up Monday's test of a nuclear bomb by firing two short-range missiles from its east coast.

The move came after the U.N. Security Council condemned the country's nuclear test as a "clear violation" of international bans.

Mitul Kotecha, head of global forex strategy at Calyon, said the news of the missile tests "reverberated through markets overnight." Although its impact has been relatively limited so far, "reports that North Korea is preparing to launch more missiles over coming days may keep markets nervous," he said.

Beyond the geopolitical incident, the market selloff was also due to investors taking a breather from the weeks-long rally which had been fueled by hopes that the worst of the economic recession is past.

With more downbeat economic news in recent days - including fears of credit ratings downgrades on major economies like the U.S. and U.K. - traders' optimism has become clouded and markets have been looking for direction.

"We seem to be stuck at the current levels," said Winson Fong, managing director at SG Asset Management in Hong Kong, which oversees about $2 billion in equities in Asia. "The market has rebounded so much we're going to need major good news to go higher or major bad news to persuade people to take some profits."

The most prominent victim of the credit ratings fears for the U.S. has been the dollar, which has slumped in value, particularly against the pound and euro, hurting prospects for European company profits.

After jumping from $1.34 in mid-May to above $1.40 on Monday, the euro traded at $1.3893 on Tuesday. During the same period, the pound rose from $1.51 to $1.5845 on Tuesday after trading at $1.5710 on Monday. The dollar managed to eke out gains against the yen, however, to 94.99 yen from 94.84 on Monday.

In Germany, consumer confidence figures failed to boost markets. The GfK research group said its forward-looking consumer climate index for June remained at 2.5 points, unchanged from May and April levels, as anxiety over job security weighed on broader hopes that the economy may be improving.

Shares in Danone, the maker of Evian mineral water and Activia yogurt, fell as much as 7.6 percent in Paris after the company announced it would raise euro3 billion ($4.2 billion) in new capital to pay down debt in the face of what it expects will be a long-lasting economic downturn.

Looking ahead, the market was awaiting reports on U.S. home prices and consumer confidence. The S&P/Case-Shiller home price index is expected to show a slightly smaller drop in March than in February, while the Conference Board's consumer confidence index is anticipated to indicate a rise in May.

In Asia, Japan's Nikkei 225 stock average closed down 36.19 points, or 0.4 percent, to 9,310.81, while Hong Kong's Hang Seng lost 130.26 points, or 0.8 percent, to 16,991.56.

In South Korea, the Kospi shed 2.1 percent at 1,372.04. The benchmark dived over 6 percent Monday on news of North Korea's nuclear test before recovering nearly all its losses.

Shanghai's index lost 0.8 percent, while Taiwan and Singapore markets dropped almost 1 percent and India's Sensex fell 1.5 percent. The only major gainer was Australia, where the key index rose 1.4 percent.

Oil prices fell in European trade ahead of OPEC's meeting this week, with benchmark crude for July delivery trading at $60.30 a barrel, down $1.37 from overnight trade.

Earlier report

HONG KONG: Asian stocks foundered Tuesday as the United Nations condemned North Korea's nuclear test and investors awaited more clues about the health of the world economy.

Major markets like Japan and South Korea drifted lower, while the dollar fell against the yen and oil prices slackened.

Tensions on the Korean Peninsula showed no signs of easing after the U.N. Security Council criticized North Korea's test of a nuclear bomb as a "clear violation" of international bans.

But the country's defiance continued with reports saying it would likely step up its weapons testing by firing short-range missiles this week.

While hurting sentiment in the short term, the standoff was more an excuse to take a breather from the recent rally, analyst said.

Caution ahead of upcoming economic reports in the U.S., as well as Wall Street and British market holidays Monday, also left investors with few reasons to set a course one way or the other.

"We seem to be stuck at the current levels," said Winson Fong, managing director at SG Asset Management in Hong Kong, which oversees about $2 billion in equities in Asia.

"The market has rebounded so much we're going to need major good news to go higher or major bad news to persuade people to take some profits."

Japan's Nikkei 225 stock average fell 55.96 points, or 0.6 percent, to 9,291.04, while Hong Kong's Hang Seng rose 19.91 points, or 0.1 percent, to 17,141.73 in an erratic session.

In South Korea, the Kospi was off 1.4 percent at 1,381.10.

The benchmark dived over 6 percent Monday on news of North Korea's nuclear test before recovering nearly all its losses.

Elsewhere, Shanghai's index lost 0.1 percent, Australia's benchmark was up 0.8 percent and Taiwan's market dropped 0.5 percent.

Both U.S. and British financial markets were closed Monday for holidays.

European markets finished little changed on Monday.

With investors eyeing key U.S. economic reports this week, including home sales, big-ticket manufactured goods and consumer confidence, Wall Street futures pointed to a slightly lower open on Tuesday.

Dow futures were down 11, or 0.1 percent, at 8,249 and S&P futures fell 0.4, or 0.1 percent, to 884.50.

Oil prices fell Asia trade ahead of OPEC's meeting this week, with benchmark crude for July delivery trading at $60.93 a barrel, down 74 cents from overnight trade.

The dollar slipped to 94.66 yen from 94.84 yen, while the euro was lower at $1.3976 compared to $1.4003. - AP

Earlier report

US, London markets closed, European flat, Asia gains

LONDON: European stocks searched for direction Monday, closing little changed amid ongoing concerns about the sustainability of recent market gains.

Asian shares rose, shrugging off reports of a nuclear test by North Korea.

Germany's DAX index of blue chips closed down 0.3 percent at 4918.45.

The French CAC-40 index rose 0.2 percent to 3236.16.

The London and New York stock exchanges were closed for national holidays, a bank holiday in Britain and Memorial Day in the United States.

Shares in Europe recovered in the afternoon after falling after the open on news that that closely watched Ifo institute's survey of German business confidence rose less than expected in May.

Sluggish demand weighed on construction and manufacturing in Europe's largest economy as the index increased to 84.2 points in May from 83.7 points in April.

In France, drug maker Sanofi-Aventis was among the CAC-40 gainers, up 1.6 percent on news of a $190 million order for swine flu vaccine from the U.S. government.

That was the second consecutive increase since March, when the indicator hit a 26-year low of 82.2 points, but short of the 85.9 points Ifo had expected and the 85 points predicted by UniCredit.

Global stocks have been seeking direction after solid gains in recent weeks. Backward-looking data such as growth and manufacturing output have been dismal, but some indicators of future activity have been more positive.

Investors were looking ahead to key U.S. economic reports this week, including home sales, big-ticket manufactured goods and consumer confidence.

"I think people are catching their breath and seeing how things go," said Gerhard Schwarz, head of equities strategy at UniCredit.

"We have of course seen an improvement in several leading indicators ... the big question is, how sustainable is this improvement?"

Asian markets retreated midday after North Korea announced that it had successfully carried out an underground nuclear test.

The country's official Korean Central News Agency called it "part of measures to bolster its nuclear deterrent for self-defense."

But investors soon tempered their reaction, turning their attention to domestic issues and the upcoming week's economic reports for further clues about the outlook for the U.S. and global economies.

South Korea's benchmark Kospi index erased nearly all its losses.

It plunged as much as 6.3 percent before bouncing back to end just 0.2 percent lower at 1,400.90.

The won also recovered from a drop against the dollar.

Tokyo's benchmark Nikkei 225 stock average rose 121.19 points, or 1.3 percent, to 9,347.00 on a slightly weaker yen and gains by steel and drug makers.

Hong Kong's Hang Seng index rose 0.4 percent to 17,121.82,

The region's markets have grown accustomed to such maneuvering by North Korea, said Linus Yip, a strategist at First Shanghai Securities Ltd. in Hong Kong.

"For the South Korean market, it's just an excuse for the market to make a correction because markets have shot up too much recently," Yip said.

"But I don't see any great impact in other Asian markets."

Japanese electronic retailers climbed after

The Nikkei financial daily said home appliance sales surged over the weekend.

As part of its economic stimulus efforts, the government kicked off its "eco points" program to boost spending on environmentally friendly electronics.

Bic Camera Inc. shot up 7.5 percent and rival Best Denki Co. surged almost 17 percent.

Markets in mainland China and Singapore - both down earlier - also rose into positive territory.

Thailand's benchmark index fell after figures showed that Southeast Asia's second-biggest economy contracted 7.1 percent in the first quarter from a year earlier.

Wall Street slid Friday as early gains built on better earnings reports from retailers faded amid anxiety about the outlook for the American economy, the world's largest.

The Dow fell 14.81, or 0.2 percent, to 8,277.32.

The S&P 500 index slipped 1.33, or 0.2 percent, to 887.00, and the Nasdaq composite index lost 0.2 percent to 1,692.01.

Oil prices slipped, with benchmark crude for July delivery down 43 cents to $61.24 a barrel in electronic trading on the New York Mercantile Exchange.

The dollar traded flat at 94.79 yen, barely up from 94.76 late Friday.

The euro was unchanged at $1.3994 after briefly rising above $1.40.

Latin American stocks rose in light trading Monday as Brazilian consumer confidence rebounded slightly and investors bet a slew of economic reports due in the U.S. this week might show early signs of a global recovery.

Brazil's benchmark Ibovespa index climbed 0.5 percent to 50,816 as consumer confidence gained for a third straight month to its highest level since September.

"Evaluations of the present situation, as much as expectations for the next months, are turning more favorable," the Getulio Vargas Foundation said in its report tracking the indicator.

Shares in Bradesco, one of the country's biggest private banks, gained 1.2 percent to 29.95 reals, while state-run oil company Petroleo Brasileiro rose 0.2 percent to 32.95 reals and iron ore producer Vale SA climbed 0.6 percent to 32.65 reals.

Shares in the three companies comprise more than a third of the index.

Brazil's currency gained about 0.5 percent to 2.02 reals to the U.S. dollar.

Mexico's IPC index, meanwhile, rose 0.4 percent to 24,198, with a 4.9 percent gain in supermarket chain Controladora Comercial Mexicana SAB, which won a sixth extension in debt talks now set to expire on May 27, according to a research note from Grupo Financiero Banamex.

The peso also gained 0.4 percent to 13.14 to the dollar as Mexico's central bank announced the current account deficit narrowed by 58 percent in the first quarter from the year-ago period amid slowing trade and tight credit.

The current account shortfall, which measures trade and transfer payments including money sent home by migrants, was 0.5 percent of gross domestic product, compared with 1 percent in the first quarter last year.

Elsewhere, Chile's IPSA gained 1.4 percent to 3,105, while Peru's IGBVL slipped 0.3 percent to 12,441.

Markets were closed for national holidays in Argentina and Colombia. - AP

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