Asian markets fall on global cues

Nikkei, Hang Seng Lead the fall while Straits Times, Shenzhen Composite Stand Aside

The Asian Markets remain volatile throughout the day trading mainly in negative arena.

The markets fall led by the banks and automakers on renewed concern on credit losses widening and slow global economic growth. The concern was raised after Standard & Poor's cut its debt ratings on three brokerages.

In U.S. the stocks notched their first decline in five sessions as on Monday reasoned by the Standard & Poor's cut its debt ratings on three large brokerages and after upheavals at Wachovia Corp. and Washington Mutual Inc. Yesterday on Wall Street, the Dow Jones Industrial Average lost 134.50 points to 12,503.82 and the Nasdaq Composite fell 31.13 points to 2,491.53, while the S&P 500 gave up 14.71 points to 1,385.67

In Hong Kong, the Hang Seng Index dropped 1.8% to 24,375.76 and the Hang Seng China Enterprises Index shed 2.9% to 13,621.98.

The Nikkei 225 Average lost 1.6% to 14,209.17, after advancing for three straight days, and the Topix index gave up 1.2% to 1,407.44.

Australia's S&P/ASX 200 declined 1.6% to 5,574.20 as the Reserve Bank of Australia (RBA) decided to leave its cash target rate at 7.25 percent during its monthly policy meeting today. In its statement the bank has reassured that it would continue to evaluate prospects for economic activity and inflation in the light of new information

First quarter headline and core consumer price index data showed inflation running at an annual pace of 4.2 %, well above the central bank's comfort zone of annual inflation being within a 2 to 3 % band.

In its statement the RBA said on balance, the board's current assessment is that demand growth will be moderate this year but in the short term inflation is likely to remain relatively high. It said a rise in Australia's terms of trade on the back of stronger commodity prices is currently adding substantially to national income and ability to spend, even with the slowing in global growth to below trend that the bank is assuming.

China's Shanghai Composite ended marginally lower by 0.7% to 3,436.40 while the Shenzhen Composite added 0.5% reaching 1,034.59 levels.

Elsewhere, New Zealand's NZX 50 index was down by 2.3% to 3,540.06 and South Korea's Kospi gave up early advances to drop 1.5% to 1,819.39.

Singapore's Straits Times Index inched up 1.1% to 3,153.94 and Taiwan's weighted index lost 1.7% to 8,579.43. Malaysia's KLSE Composite fell by 0.4% to 1,257.57 while the Thailand's SET tumbled by 0.7% to 576.12.

In the afternoon trading India's Sensitive Index, or Sensex, was down by 0.7% to 15,951.51and the broader S&P/CNX Nifty fell by 0.6% to 4,711.70.

In currency trading, the U.S. dollar changed hands for 104.37 yen versus 105.10 yen late Monday. The greenback bought 104.40 yen in late-Monday New York trading. This gain in the yen is eroding the value of overseas sales when converted into the local currency.

Oil prices eased in Asian trade on continuing concerns over global energy demand. New York's main oil futures contract, light sweet crude for July delivery, slipped 14 cents to $127.62 per barrel. The benchmark contract had closed at $127.76 on Monday at the New York Mercantile Exchange.

Crude oil has shed about $8 since striking record peaks of $135.14 in London and $135.09 in New York on 22 May 2008.

Losses from the banking sector and sports car maker Porsche kept European shares in check in the opening trade, offsetting an advance for French supermarket group Carrefour and deal-making moves for Corporate Express.

In the opening trade, the U.K. FTSE 100 index inched up 0.3% to 6,027.90, the German DAX 30 index fell 0.4% to 6,979.04 and the French CAC-40 index edged up 0.1% to 4,938.56.

However at 9.54 GMT the U.K. FTSE 100 index was stable with a gain of 0.3% to 6,025.50, the German DAX 30 index fell 0.2% to 6,993.04 and the French CAC-40 index edged up 0.3% to 4,950.27. The recovery was pioneered by the economic releases for the region.

On the economic front the producer prices for Euro-zone matched there biggest ever percentage gain on the year in April fueled by rising energy prices. Prices of goods leaving euro-zone factory gates rose 0.8% on the month and 6.1%% on the year in April, matching the record high annual increase seen in October 2000. Prices rose 0.7% on the month and a revised 5.8% on the year in March.

The data showed higher energy costs remained the key factor pushing up producer prices. Crude oil futures breached $135 a barrel for the first time last month.

Excluding construction and energy, prices rose 0.4% on the month, and 3.7% on the year. That follows gains of 0.4% on the month, and 3.8% on the year in March.

The energy component of the index rose 2.0% on the month and 14.3% on the year in April, the strongest gain on an annualized basis since it increased 14.9% in July 2006.

The data also showed the rise in producer prices of intermediate goods picked up on the month, prices for capital goods gained by the same amount, while the increase in the price for durable consumer goods and non-durable consumer goods slowed.

Meanwhile an unexpected boom in investment spending fueled a stronger than estimated rebound in the euro-zone economy during the first three months of the year.

According to the figures released by the Euro stat showed gross domestic product in the euro zone during the first quarter was 0.8% higher than in the fourth quarter, and 2.2% higher than in the first quarter of 2007. The quarter-on-quarter growth rate was revised up from Euro stat’s first estimate of 0.7%, while the year-on-year growth rate was unrevised. It was the strongest quarter-on-quarter performance since the final three months of 2006.

Euro stat also cut its estimate of GDP growth in the three months to December, to 0.3% on the quarter and 2.1% on the year from 0.4% on the quarter and 2.2% on the year previously.

Those revisions made the surprising rebound in the euro-zone economy even more dramatic than first thought, and increase the likelihood that the European Central Bank will raise its key interest rate to reduce an inflation rate that stood at 3.6% in May.

According to Euro stat, business investment increased 1.6% from the fourth quarter and accounted for half of the overall increase in economic activity during the first quarter. Consumer spending also rose, having contracted in the fourth quarter, but by a much more modest 0.2%. A build up in inventories and government spending also helped fuel growth, as did exports.

By sector, construction recorded the fastest rate of growth, increasing 1.9% from the fourth quarter, an unusually strong performance for the first three months of the year, when cold weather usually limits activity.

But activity in the financial and business services sector also picked up slightly, as did trade, transport and communications services.

Germany accounted for the bulk of the first-quarter pickup as the euro zone's largest economy grew 1.5%, up from 0.3% in the fourth quarter. But France and Italy also contributed to the pickup, with the latter's economy growing 0.4%, having contracted at the same rate in the fourth quarter. Of the euro zone's 15 members, only Portugal's economy failed to grow, contracting 0.2%.

The euro zone's performance was much stronger than that of the U.S., which grew just 0.2% quarter-on-quarter, but was matched by that of Japan.