Bullish force fizzles out in Asia

Dollar maintains gains after yesterday's intraday rebound

Asian markets flipped back bulk of their yesterday's strong gains as the markets watched at the steady rebound in US dollar and the retreat in commodities like base metals and crude oil hurt the sentiments. The market was also hit by known fears about Chinese monetary tightening. A wave of extremely strong economic data, particularly on the prices and lending front pushed the investors back as investor's looked at it as a sign of further rounds of monetary tightening from the world's faster growing economy.

China's inflation and bank credit continued to rise further in April. Latest figures from the State Bureau Of Administration showed that China's consumer prices were 2.8% higher in April than a year earlier, while producer prices were up 6.8%. This figure took the gauge to an 18-month. Chinese banks extended 774 billion yuan ($113.5 billion) worth of new local-currency loans in April, up from 510.7 billion yuan in March, up sharply by 51%, according to central bank data. This has ensured the markets that more measures are certainly due from the central bank on the monetary tightening front after the spree of hikes in the banks reserve requirements in last few weeks.

Property sector in China is also showing no signs of a moderation in prices. Urban property prices in China continued to rise in April in spite of several policy-tightening measures from Beijing. Property prices in 70 cities increased 12.8% in April from the year-earlier month, accelerating from the 11.7% rise registered in the previous month.

Chinese stocks reacted sharply to this data as rate hike and monetary tightening fears loomed large. China's key stock index fell more than 2 percent to its lowest in a year, reversing earlier gains as relief over the euro zone debt package faded and worries mounted over a worsening inflation outlook. The Shanghai Composite Index fell as far as 2,638.5 points, its lowest close since May 27, 2009, after reversing a nearly 2 percent rise in early trade.

Australian stocks ended in negative territory as traders digested the impact of the trillion-dollar package to the debt crisis in Europe. Weak trading across Asian markets despite sharp rally in Wall Street in the previous session also weighed on market sentiment with resources facing major brunt. The benchmark S&P/ASX200 Index declined 51.80 points, or 1.13% to 4,548, while the All-Ordinaries Index ended at 4,573, representing a loss of 49.00 points, or 1.06%.

The stock market in Japan also ended in negative territory after sharp gains in last session.. Fresh concerns about the implementation of the financial package to Europe impacted market sentiment. The benchmark Nikkei 225 Index fell 119.60 points, or 1.1%, to 10,411.10, while the broader Topix index of all First Section issues fell 12.54 points, or 1.3%, to 932.10

In Mumbai, the key benchmark indices edged lower as world stocks retreated after yesterday's big surge amid uncertainty over euro-zone countries' ability to reduce their deficits. The BSE 30-share Sensex was provisionally down 205.13 points or 1.18%, up close to 20 points from the day's low and off close to 255 points from the day's high. All the sectoral indices on the BSE were in the red. The market breadth, indicating the overall health of the market, was weak. Metal, realty, telecom and IT stocks fell. Hindalco Industries declined in a weak market despite strong Q4 result.

The Sensex had surged 3.35% on Monday, 10 May 2010, as global stocks rallied after European leaders on Sunday, 9 May 2010, announced a rescue package to prevent Greece's fiscal woes from triggering a broader sovereign-debt crisis.

In other markets, stocks in Singapore dropped 0.80%, Taiwan equities came off by 0.73% while Hong Kong's Hang Seng shed 1.37%.

In the U.S., stocks rallied off of last week's lows to open the week on Monday, as news of a nearly $1 trillion package engineered to maintain financial stability in Europe reassured the markets. The major averages all closed firmly in positive territory, recovering a significant portion of last week's steep losses. The European aid package totals up to 750 billion euros, or $970 billion, in loans and is aimed at safeguarding Euro zone nations facing debt issues following the crisis in Greece. The Dow jumped 404.71 points or 3.9% to 10,785, the Nasdaq advanced by 109.03 points or 4.8%to 2,375 and the S&P 500 surged up by 48.85 points or 4.4% to 1,160.

Light sweet crude oil futures for June delivery slipped after modest gains in the early trades. The commodity edged up above $77 per barrel but soon slipped as the market participants eyed the recovery in the US dollar. The commodity currently trades at $75.74, down $1.06 from the previous close.