Asian stocks mostly slip

Regional benchmarks record substantial losses on China measures, US Fed in focus

The Asian markets slipped today, giving up the gains in the last few days as the risk appetite went for a toss amid rising global worries that a combination of tight lending in China and liberal quantitative easing in the western economies does not bode well for the global economy. The US dollar rallied after slipping to 1.4000 against the Euro in overnight trades, its lowest level in nearly eight months and commodities witnessed an across the board collapse as well, pulling down the safe haven gold too.



Yesterday, the Chinese central bank appeared to have stepped in after several months of loose controls on bank lending by the Chinese Banking Regulatory Commission (CBRC). In August, Chinese banks lent 545 billion Yuan, much higher than what the central bank would have desired and the latest tightening efforts are indicating that the Asian nation is keen on cooling its economy down even as the situation on the global front remains strained. The overheating concerns are apparent in the economy with Chinese authorities announcing 3.5% rise in the consumer price index in August, the highest reading in almost two years. The country hiked the reserve requirement ratio by 0.5% to 17.5% for its six major banks.

The dollar rallied and the euro fell Tuesday as investors waited for the minutes of the latest Federal Open Market Committee meeting. Sentiment was dominated by speculation that the FOMC minutes will show that any plans for further quantitative easing from the Federal Reserve will prove smaller than expected.

In US, overnight trades were very thin and stocks showed a lack of direction throughout the trading session. The major averages bounced back and forth across the unchanged line before ending the day nearly flat. After showing a strong upward move last week, the Dow added just 3.63 points to close at 11,010.11. Markets were very much listless as many traders stayed on the sidelines amid a lack of first-tier economic data due to the Columbus Day holiday.

Things turned out sloppy in Asia though with the Japanese stocks buffeted on twin worries of slowdown in its export demand from emerging and developed nations alike while the soaring value of its currency hurt the sentiments further. The Japanese Finance Minister Yoshihiko Noda has been quoted as saying that he is watching foreign-exchange markets with great interest and that Japan is willing to take decisive steps, including intervention, if needed. The benchmark Nikkei 225 stock index dropped 200 points or 2.09% to 9388.64.

The Australian stocks closed in red on broad-based selling in Asia and drop in commodities. The benchmark S&P/ASX200 Index slipped 79.30 points, or 1.69% to close at 4,618 points, while the All-Ordinaries Index dropped 75.80 points or 1.60% to end at 4,686.

In Mumbai, the stocks recorded steep losses on weak global cues and a sharp slide in India's IIP growth. India's IIP grew by just 5.6% in August 2010 after expanding by an impressive 15.2% in July. Metal and Realty stocks continued bore the brunt of the sell-off. The BSE Sensex slipped 137 points or 0.67% to close at 20,203. The NSE Nifty lost 49 points or 0.73 to close at 6,091.

However, in China, stocks rebounded as energy and metal producers rallied as possible US quantitative easing measures to boost its economy may weaken the dollar and spur inflows into the world's fastest growing economy. The Shanghai Composite Index added 34.46 points or 1.23% to close at 2841.40 points.

In other markets, the Straits Times index in Singapore dropped 0.44%, Hang Seng index in Hong Kong gave up 0.37% while the TSEC index in Taiwan lost more than 1%. US dollar recorded sharp gains, pulling Crude under $82 per barrel and Gold under $1250 per ounce.