Asian stocks rumble as recovery hopes dashed

Regional benchmarks slump around 2-3% as investors eye weak US jobs data and European debt worries resurface

Stocks in Asia rumbled today, coming under a heavy selling spree as the markets were quick to react to a 300+ points slide in the DOW in Friday's trades. The investors were in a panic selling mode following a tremendous rise in the US dollar, which hit highs under 1.1900 against the Euro and exerted a tremendous selling pressure on the risky assets. Markets were also shivering on ideas China would tighten its monetary policy soon and help its already moderating economy to soften further in the second half of the year. Though a nominal pick up was seen in the markets from the day's lows, it was a panicky Monday for stocks with a intraday recovery in DOW futures, which cut losses to quote down 20 points when last seen, not being able to influence the direction much



On Friday, the dollar rose considerably and the Wall Street slumped on a combination of poor US labor market data and concerns that European sovereign debt problems could get worse. The investors were seen selling the single currency in frenzy after comments by an official in Hungary's new government revealed that the country faces a Greece-style fiscal meltdown sent the euro tumbling. The new government rushed to calm markets Saturday with a pledge to keep the country's official budget deficit goal for 2010 while stressing that Hungary isn't facing any sovereign credit default.

Hungary is not yet inside the euro area, markets have been worried that fiscal problems of the kind that initially plagued Greece could soon extend to other European countries, raising risks for institutions with high exposure to those economies and affecting the health of nations with economic ties to Europe, including the United States

In the US, May non-farm payrolls grew by just 431,000, but below the 515,000 increase expected, with census jobs contributing to most of the rise and private sector employment up by just 41,000 jobs.

These factors continued to be in the play today as well with the Australian share market slumping sharply. The benchmark S&P/ASX 200 closed down 123.5 points, or 2.8%, at 4325.9, after hitting a seven-day low of 4299.8. Share trading volumes were about average. Resources were given a rough treatment with the miners and oil producing company shares sliding heavily.

Japanese stocks slipped in a hurry today, sliding down to multi month low after the U.S. reported slower-than-estimated jobs growth, the euro weakened and commodity prices declined. The Nikkei 225 Stock Average slid 3.8% to 9,520.80 at the close of trading while the broader Topix index lost 3.5 % to 859.21, with only 41 of its 1,672 stocks advancing. The euro weakened against the yen to its lowest level since November 2001. Against the dollar, the Japanese currency strengthened to as much as 90.98 from 92.69. This two-way surge in the Japanese Yen hurt the exporters a lot and made companies like Toyota record heavy losses.

In China, stocks dipped to a 13-month low as bankers and property developers slumped. A worsening government debt crisis in Europe fueled concern the global economic recovery will slow and hurt the export driven Chinese corporates. Bank of Communications Co lost out 3.3 after it cut the size of its rights offer. Aluminum Corp. of China Ltd. and Jiangxi Copper Co dropped around 1% after LME Copper perished to its 8 month lows in morning trade. China Vanke Co led developers lower after the company reported its May sales fell 20 %.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, eased 1.6% to 2,511.73, the lowest close since April 30, 2009. The index has fallen 23 % this year on concern growth will slow as the housing market cools and Europe's debt crisis threatens China's exports. The CSI 300 Index also eased around 2% today.

In Mumbai, hefty selling pushed the benchmark BSE SENSEX sharply under 17000 point mark. The key benchmark indices extended recovery in mid-afternoon trade as index heavyweight Reliance Industries cut losses. Asian stocks recovered from an initial sharp slump. Reports that monsoon has revived after being stalled by a cyclone last week, also aided intraday recovery on the domestic bourses. However, the BSE 30-share Sensex still closed down 336.62 points or around 2%.

In other markets, Hang Seng in Hong Kong and Straits Times in Singapore dropped around 2% while TSEC in Taiwan plummeted by 2.54%.

In commodities, crude oil pared losses and was firmly trading above $71 per barrel mark. The counter had slipped under $70 per barrel in the early moves but then recovered smartly in tune with the upswing in equities and slight moderation in the US dollar. Gold failed to hold onto an intraday rebound though and broke under $1220 per ounce mark to quote at $1215.50, down $2.20 per ounce from the previous close.