Asian markets sagged in pre-Fed caution

Shanghai slumped on tightening worries while Sensex, Hang Seng, Nikkei follows

Stock market in Asian region sagged on Wednesday, 12 August 2009, tracking the losses on Wall Street and as investors locked in profits as they waited to hear what the US Federal Reserve would say about prospects for recovery in the world's largest economy.

On Wall Street, stocks lost ground as investors fretted over discouraging bank headlines and the Fed's policy-making meeting. The Dow Jones Industrial Average closed down 96.5 points, or 1.03%, to 9241.45, while the S&P 500 gave up 12.75 points, or 1.3%, to 994.35. The Nasdaq Composite edged down 22.51 points, or 1.1% to 1969.73.

On the economic front, the Labor Department said preliminary data showed a 6.4% increase in productivity in the non-farm business sector in the second quarter, the largest since 2003, as hours worked declined faster than output. At the same time, unit labor costs decreased at an annual rate of 5.8%. In other data, the Commerce Department said wholesale inventories fell 1.7% in June, from a 1.2% decline the month before and vs. expectations for a 0.9% drop.

In the commodity market, crude oil fell below $69 a barrel in New York after equities declined and on speculation supplies increased in the U.S., the largest energy-consuming nation.

Crude oil for September delivery dropped as much as 61 cents, or 0.9 percent, to $68.84 a barrel on the New York Mercantile Exchange. The contract was at $69 at 3:22 p.m. in Singapore. Yesterday, it fell $1.15, or 1.6%, to settle at $69.45 a barrel. It was the fourth daily decline and the first time oil settled below $70 this month.

Brent crude oil for September settlement on London’s ICE Futures Europe Exchange dropped to as low as $71.68 a barrel, down 78 cents, or 1.1%, and traded at $71.92 at 3:23 p.m. in Singapore. Yesterday, the contract fell $1.04, or 1.4 percent, to settle at $72.46.

Gold advanced after U.S. stocks fell and the dollar depreciated on concern that bank earnings won’t improve in the second half. Gold for immediate delivery rose as much as 0.3% to $948.45 an ounce before trading at $946.70 at 12:58 p.m. in Singapore.

In the currency market, US dollar extended recent rally against most major currencies, helped by sharp falls in yen crosses, as investors awaits FOMC announcement today.

The Japanese yen strengthened against major currencies. The Japanese yen was quoted at 95.90 per greenback, down from Tuesday’s quote of 96.86-87 yen.

The Hong Kong dollar was trading at HK$ 7.7508 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.

In Sydney trade, the Australian dollar lost almost two US cents, after domestic wages data sparked doubts that the central bank will raise the overnight cash rate any time soon. At the local close, the local currency was trading at $US 0.8187, down from Tuesday's close of $US 0.8373.

In Wellington trade, the New Zealand dollar was weaker as investor’s trimmed positions ahead of a Federal Open Market Committee meeting in the US. A decline in US equities on Tuesday US time on profit taking and heightened rising risk aversion after disappointing economic data from China was also a factor.

The US dollar rallied against commodity based currencies like the NZ dollar on the suggestion of weakness in China's economy. By 5pm the NZ dollar was at US 66.48 cents, down from US 67.35 cents at the same time yesterday.

The South Korean won ended at 1,246.5 won against the dollar, down 7.4 won from Tuesday's close, as offshore investors snapped up the greenback.

The Taiwan dollar weakened further against the greenback. The Taiwan dollar gave up against the US dollar as it was trading lower at NT$ 32.9250, down by NT$ 0.0700 from Tuesday’s close of NT$32.8550.

Coming back in equities, the drop in Chinese markets led a generally down day for Asian stocks as most of the other markets ended lower taking a lead from Wall Street's drop Tuesday and on caution ahead of the outcome of a U.S. Federal Open Market Committee meeting.

In Japan, the shares market tumbled, easing from 10-month high as profit takers took money after weak finish of Wall Street overnight and ahead of the US Federal Reserve’s policy statement, while losses in other Asian markets put a further drag on sentiment. Exporters and automakers tumbled after yen strengthened against greenback. Banks and financials plummeted on negative rating for US banks. At the closing bell, the Nikkei 225 Stock Average index tumbled 150.46 points, or 1.42%, to 10,435, while the broader Topix index stumbled 13.64 points, 1.4%, to 959.87.

In Mainland China, share market stumbled on broad based sell off across the board as worries deepened about a possible tightening of market liquidity following a sharp drop in bank lending in July. Shares of exporters and banks and financials and properties dropped after the government data showed that exports and new loans tumbled in July 2009. Materials, industrials, and energy stocks dropped on pullback in commodities and crude oil prices. Falling shipping freight rates weighed down shipping companies.

At the closing bell, the Shanghai Composite Index, measuring A shares and B shares on the Shanghai Stock Exchange, plunged 4.66% or 152.01 points to 3,112.72, while the CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, plummeted 4.47% or 158.98 points to 3,397.40.

On the economic front, China's fiscal revenue rose 10.2% year on year to 669.59 billion Yuan (97.96 billion U.S. dollars) in July, Ministry of Finance announced today. The July figure brought the total fiscal revenue in the first seven months to 4.067 trillion Yuan, down 0.5% year on year, according to a statement from the ministry.

In Hong Kong, the benchmark Hang Seng index tumbled after opening lower, on tracking a weak finish on Wall Street and also weighed by profit-taking pressure after the benchmark indices ended at near 12-month high Tuesday. The Hang Seng Index retracted 638.97 points, or 3.03%, to 20,435.24, while the Hang Seng China Enterprise has retreated 332.47 points, or 2.77%, to 11,656.32.

In Australia, the stock market surged after opening lower, shrugged off a negative lead from Wall Street as surge in consumer confidence and a better than expected profit result from the Commonwealth Bank outweighing falls from the energy and properties. Investors favored individual stocks over the broader sectors. At the closing bell, the benchmark S&P/ASX200 index added 11.1 points, or 0.26%, to 4,343.1, meanwhile the broader All Ordinaries raised 11.5 points, or 0.27%, to 4,345.9.

On the economic front, the Westpac-Melbourne Institute consumer sentiment index rose 4 points in August to 113.4 points. The Australian Bureau of Statistics said that the wage price index grew at 0.8% for the second straight quarter ended June2009. The index saw the annual growth rate ease to 3.8% in the year to June from 4.2% as of the previous quarter, its slowest pace in at least two years.

In New Zealand, the share market eased after a pull back in major stock indices in the United States and ahead of the Fletcher Building result tomorrow morning. The benchmark NZX-50 index closed down 24.22 points, or 0.79%t, at 3079.69.

In South Korea, stocks closed lower as foreign and institutional investors unloaded financial and auto firms to lock in profits. The benchmark Korea Composite Stock Price
Index (KOSPI) fell 13.86 points to 1,565.35, the first drop in five sessions.

On the economic front, South Korea's unemployment rate fell to the lowest level in six months in July amid growing signs a protracted economic slump might be nearing an end. According to the report by the National Statistical Office, the jobless rate stood at 3.7% last month, down from 3.9% the previous month. The economy, however, shed 76,000 jobs last month compared with a year earlier, turning around from a year-on-year job growth in June, the first gain in six months, by adding 4,000 positions, the report showed.

In Singapore, the stock market tumbled as investors prompted for profit booking following a weak finish of Wall Street overnight and other Asian bourses. Banks dragged down the market on tracking negative cues from US peers. Meanwhile selling pressure was evident in manufacturing, multi industries, and construction shares. At the closing bell, the blue chip Straits Times Index eased 25.99 points, or 1%, to 2,571.31.

In Taiwan, stock market carried on its swing between gains and losses, as the rising death toll from Typhoon Morakot weighed on market sentiment and as financial shares tracked losses among their U.S. peers. The benchmark Taiex share index continued to swing between gains and losses ending the little lower by 10.12 points or 0.15%, closing the day at 6898.90.

In Philippines, despite the positive economic prospects, the stock market closed more than 1% lower, as investors took cues from the losses on Wall Street overnight, which in turn brought the key heavy weight stocks under selling pressure. At the concluding bell, the benchmark index PSEi lost 1.11% or 32.02 points to 2,828.52, while the All Shares index fell 1.01% or 18.36 points to 1,794.92.

In India, stocks were hurt by persistent concerns that deficient rainfall in several parts of the country would affect rural incomes and delay economic recovery. But the key benchmark indices closed with small losses, recovering sharply from a steep intra-day slide as stronger-than-expected domestic industrial data and recovery in European stocks aided the rebound. The BSE 30-share Sensex was down 54.43 points or 0.36% at 15,020.16. The S&P CNX Nifty was down 13.85 points or 0.31% to 4,457.50.

Elsewhere, Malaysia's Kula Lumpur Composite index went down 0.48% or 5.74 points to 1180.54 while stock markets in Indonesia’s Jakarta Composite index ended the day lower at 2347.36.

In other regional market, European shares moved off early lows on Wednesday to trade flat amid contrasting reactions to earnings from companies such as utility E. Regional markets were mixed with the U.K. FTSE 100 index flat at 4,670.35, the German DAX index up 0.4% at 5,306.51 and the French CAC-40 index up 0.2% at 3,462.4