China conspires with Europe to pull Asia lower

Major benchmarks down with hefty losses on first session of week

Asian stocks endured steep losses in the first session of the week, starting off in a depressing manner as worries over the European debt defaults and the future of the Euro zone continued to make rounds. The indices were buffeted on concerns about overheating in China too; making the investors jittery on both the internal and external counts. US Dollar snapped a four-year high against the Euro today, reflecting a tremendous amount of risk aversion all the risky assets fell sharply. Gold managed to hold strong though, as times of immense uncertainly and a cataclysmic event like a series of probable sovereign defaults kept the demand for safe haven strong. Stocks have been floundering in the last couple of weeks, and the strength in safe havens is making the outlook uncertain even after the benchmark indices witnessed a correction of around 8-12% in last few weeks, coming off their highs.

China's Premier Wen Jiabao said over the weekend that the country faced uncertainties and tough challenges in balancing its economic structural mix, hinting that Beijing is hesitant to tighten its monetary policies even further to curb inflation. China must avoid “piling on adjustment policies”, which carry risks of "negative consequences" on the economy, amid complex domestic and international conditions, Wen said. This spooked the investors who were already contemplating about serious faultiness under the Eurozone after the French President Nicolas Sarkozy threatened to pull France out of the euro during negotiations over the aid package to Greece, if certain criteria are not met.

China's key stock index tumbled more than 5 percent on Monday to its lowest close in a year, led by property stocks, as retail investors fled the market after a month-long rout sparked by the government's severe clampdown on surging property prices. The Shanghai Composite Index closed at 2,559.9 points, its lowest close since May 4, 2009, and posted its biggest one-day percentage drop in more than eight months as panic selling emerged in the afternoon. The index has dropped nearly 20 percent in about a month.

The Australian stocks ended the day on a weak note, having plunged more than 3% amid growing concerns about the debt crisis and its contagion effect in Europe. Sharp drop in indices on Wall Street on Friday and plunge in other markets across the region aggravated the fears as trader preferred to sell-off and move to the sidelines. The benchmark S&P/ASX200 Index plunged 143.90 points, or 3.12% to 4,467, while the All-Ordinaries Index ended at 4,501, representing a loss of 142.30 points, or 3.06%.

On the economic front, a report released by the Australian Bureau of Statistics revealed that housing finance for owner occupation, excluding alterations and additions, declined a seasonally adjusted 3.4% month-on-month in March to A$13.53 billion. The report further noted that, commercial finance rose 1.1% to A$28.37 billion, while personal finance decreased 1.3% to A$6.87 billion and lease finance climbed 5.8% to A$388 million, all in seasonally adjusted terms.

The Japanese stocks plunged as resources slipped and exporters were hurt on ideas that the European crisis would hurt the export demand. The benchmark Nikkei 225 Index dropped 226.75 points, or 2.17%, to 10,236, while the broader Topix index of all First Section issues was down 16.02 points, or 1.71%, to 920.

On the economic front, a report released by the Cabinet Office revealed that private sector machinery orders climbed a seasonally adjusted 5.4% in March. The report revealed that, on an annual basis, core machinery orders climbed 1.2%, higher than forecasts for a marginal 0.2% increase, following a sharp 7.1% plunge in the previous month. For the first quarter of calendar 2010, machinery orders advanced 2.9%, higher than economists' forecast for a 1.6% gain. Separately, the Bank of Japan revealed that an index measuring prices for domestic corporate goods increased 0.4% in April to 103.0, compared to the previous month.

In Mumbai, stocks extended their recent bearishness. As per provisional figures, the BSE 30-share Sensex was down 165.33 points or 0.97% to 16,829.27. The Sensex fell 443.60 points at the day's low of 16,551 in early afternoon trade. The index fell 32.68 points at the day's high of 16961.92 in early trade. The S&P CNX Nifty was down 36.70 points or 0.72% to 5,056.80 as per provisional figures, off the day's low of 4,966.25. The BSE Mid-Cap index was down 0.2% while the BSE Small-Cap index was down 0.65%.

In other markets, Hang Seng shed 2.14%, Straits Times dropped 0.75% while TSEC lost 2.23%.

In the U.S., stocks saw sharp losses for a second straight session on Friday, as concerns regarding the impact of the European debt crisis overshadowed continued improvement on the U.S. economic front. The major averages all finished firmly in negative territory but still higher on the week. The Dow dipped by 162.79 points or 1.5% to 10,620, the Nasdaq closed down 47.51 points or 2% at 2,347 and the S&P 500 slid by 21.76 points or 1.9% to 1,136.

In currencies, US dollar edged near 1.2200 levels against the Euro- its four-year highs in the early trades. The currency moderated slightly and was seen trading above 1.2300 in the London trades.

Light sweet crude oil futures for June delivery edged up after falling under $70 in the early moves. The counter was last seen quoting at $71.83, up 29 cents per barrel in electronic trading.