Asia spooked by German short selling moves

Dollar hits fresh four-year highs under 1.2200 as investors continue to be worried on Euro zone debt counts

The Asian stock market pared yesterday's modest advances and tumbled today as weak global cues and constant strength in the US dollar hurt the Asian equities. The benchmark indexes in major Asian markets dipped around 2% as fears about the Eurozone debt contagion refused to abate easily. The sentiments in risky assets were even more hurt yesterday on reports of Germany's decision to ban naked short selling in certain financial instruments, including select company shares and Euro government bonds. This took Euro to a fresh four-year low against the dollar, while crude oil slumped under $68 and hit a low of in early Asian trades, reflecting a tremendous drop in the risk appetite.

The Japanese stock market ended in negative territory though some intraday bounce back emerged in the stocks. Sharply lower closing on Wall Street, having given up considerable gains in early session, also pushed the buyers aside though bargain hunting in select stocks turned out to be a primary feature of the days in the second half of trading. The benchmark Nikkei 225 Index dropped 55.80 points, or 0.54%, to 10,187, while the broader Topix index of all First Section issues was down 3.27 points, or 0.36%, to 911.

On the economic front, a final report released by the Ministry of Economy, Trade and Industry revealed that industrial production in the country grew 1.2% in March compared to the previous month, revised upwards sharply from the preliminary report of a nominal 0.3% growth. On an annual basis, industrial production surged up 31.8%. The report further noted that shipments recorded a monthly increase of 2%, up from the initial estimate of 1.6%. At the same time, the decline in inventory was confirmed at 1.6%. On an annual basis, shipments climbed 29.9%, while inventory dropped 6%. Inventory ratio slipped 5.5% in March.

Further, the Bank of Japan revealed that output prices in manufacturing industry increased 1.2% in April compared with the same month last year. The report noted that, on a month-over-month basis, manufacturing output prices increased 1.2% in April, faster than the 0.2% rise in the prior month.

In Australia, stocks closed sharply lower following the rout in the regional indices. The market tanked to 9-month low as metal stocks were hurt badly. The benchmark S&P/ASX200 Index was down 83.60 points, or 1.87% to close at 4,387, while the All-Ordinaries Index ended at 4,414, representing a loss of 85.70 points, or 1.90%.

On the economic side, wages in the country rose at the fastest pace in more than a year in the first three months of 2010. Data released by the Australian Bureau of Statistics revealed that wages grew a seasonally adjusted 0.9% between January and March compared to the preceding three months. That is slightly above analyst forecasts for a 0.8% increase and follows a 0.6% increase in the December quarter. It also marks the fastest rate of wage growth since the December quarter of 2008, when wages increased 1.2%.

The minerals exploration expenditure in Australia is estimated to show a decrease of 11%, indicating that output of metals and minerals might be slowing in one of world's largest commodity producing nations, according to a latest report from the Australian Bureau of Agricultural and Resource Economics (ABARE). In its Minerals and energy Major development projects – April 2010 listings report, the ABARE stated that in 2009-10, mineral exploration expenditure in Australia is estimated to be $5.5 billion, a decrease of 11 per cent on expenditure in 2008-09.

In China, sellers returned with vengeance after an impressive 1% jump in the market yesterday. Chinese stocks were hurt by an utterly bearish undertone in the property and financial shares. The benchmark Shanghai Composite Index lost 0.27 percent to close at 2,587.81 points. The Shenzhen Component Index fell 0.12 percent to 9,991.4 at the close. Property stocks failed to continue Tuesday's strong performance with the sector losing 1.56 percent on continuing concerns over further tightening measures to cool the market.

In Mumbai, the BSE 30-share Sensex hit its lowest level in 2-1/2 months. The barometer index was provisionally down 460.03 points or 2.73%, up close to 40 points from the day's low and off close to 385 points from the day's high. The S&P CNX Nifty fell below the psychological 5,000 level. Banks were hammered with India's largest private sector bank by net profit ICICI Bank slumping close to 7% after an in-principle approval for the merger of Bank of Rajasthan with ICICI Bank.

In other markets, Hang Seng ended down 1.83%, Straits Times shed 2.40% while the TSEC lost out a relatively modest 0.34%.

The U.S. stock futures are showing that the DOW may slide by around 63 points at the open. The futures have been hit persistently during the day. The US dollar struck fresh four year high of 1.2142 and are currently consolidating just under 1.2200 threshold. Light sweet crude oil futures for June delivery dipped under $68 per barrel in electronic trading and currently trade at $68.38, down more than 1 dollar right now.