Asian stocks succumb to substantial sell off

Markets slump as investors continue to be worried about global recovery

Asian stocks succumbed to substantial sell off today as the weak overnight cues from the US markets and continued worries about the global economic recovery hurt the sentiments. The US Personal spending went up slightly than expected in the month of July, according to the latest updates from the Commerce Department yesterday. The personal spending increased by 0.4% in July after coming in unchanged in June. However, the personal income rose by just 0.2% in July after coming in unchanged in the previous month. US stayed mostly firm in the Asian trading; keeping a tab on the overall movements while weakness in commodities hurt the resource stocks.



The US stocks slumped yesterday as investors stayed worried about the economy and continued to resort to the safe haven assets like Gold and US dollar. The DJIA dropped 140.92 points, or 1.4%, to end at 10,009.73, near session lows. This ensured that the barometer gives away most of the gains it recorded on Friday and it looks like the week is going to turn another as another tough outing for the bulls as market players brace up for the Fridays non farm payroll numbers.

The Japanese stocks closed in red, extending an intraday drop from the last session as the benchmark Nikkei 225 Index tested a new 16-month low as measures announced by the Bank of Japan to arrest the strengthening of the local currency against the US dollar failed to materialize and the currency continued to find strength. The benchmark Nikkei 225 Index dropped 325.20 points, or 3.55%, to 8,824, while the broader Topix index of all First Section issues slid 24.54 points, or 2.96%, to 805.

On the economic front, a report released by Japan's Ministry of Finance revealed that its preliminary read on Industrial Production showed an increase of 0.3% in July, the first increase in three months. For the full year to July, Industrial Production was up 14.8%. A report released by the Ministry of Economy, Trade & Industry in Japan revealed that retail sales rose 3.9% from a year earlier to JPY 11.7 trillion in July.

The Australian market ended down as well, down more than 1%, following weak cues from Wall Street where the major averages declined on concerns about the economy amid thin volumes. Some profit selling emerged today after the stocks rallied by their magnitude this month in last session. Weak trading across other markets in the Asian region and lackluster commodity prices also kept the index-linked counters in check. The benchmark S&P/ASX200 Index declined 48.50 points, or 1.09%, and closed at 4,404 points, while the All-Ordinaries Index ended at 4,439, dropping 44.30 points, or 0.99%.

On the economic front, a report released by the Australian Bureau of Statistics revealed that retail sales expanded more than expected in July, led by higher sales in cafes, restaurants & takeaway food services. As per the report, retail sales increased 0.7% to A$20.4 billion during the month compared to a revised 0.4% increase in the previous month. Economists expected the retail sales to rise 0.4% during July. The report further noted that sales at cafes, restaurants & takeaway food services increased 5.3%, while food retailing rose 0.4%. On the other hand, household goods retailing fell 1.7%.

China's stocks also slipped after awesome gains in the last session. The Shanghai Composite Index shed 13.87 points, or 0.50%, to close at 2,638.80. The Shenzhen Composite Index for China's smaller second exchange edged up 0.7 percent to 1,166.50. Weak cues from the other markets in the region also impacted sentiments as traders preferred to move to the sidelines ahead of slew of economic data in the US during the course of the week.

In Mumbai, the key benchmark indices erased almost the entire intraday losses in late trade. The BSE Sensex once again fell below the psychological 18,000 level, shortly after regaining that level in late trade. The BSE 30-share Sensex was provisionally down 83.31 points, off 66.86 points from the day's high and up 128.81 points from the day's low. Data showing strong economic expansion in the first quarter aided recovery from lower level. A government report at showed the Indian economy expanded at the fastest pace in 2-1/2 years in Q1 June 2010. The BSE 30-share Sensex was provisionally down 83.31 points or 0.46% at 17,948.80.

In other markets, the Hang Seng index in Hong Kong lost 0.97%, TSEC in Taiwan plummeted 1.61% while the Strait Times index in Singapore pared 0.23%. The crude oil prices stumbled in Asia after a sharp drop in the last session. A failure to hold above the critical $75 per barrel mark finally led to a huge sell off in the commodity and made the futures end a three-session rally last night. Light, sweet crude oil for October delivery settled 47 cents, or 0.6%, lower at $74.70 a barrel on the New York Mercantile Exchange. The prices backed off further in electronic trades, quoting at $73.69, down $1.01 per barrel from the previous close.