Asian markets succumb to selling pressure

Global risk appetite hit by China rate hikes fears, simmering Euro zone debt troubles

Asian markets mostly slipped today as profit selling ruled high on ideas China will resort to further monetary tightening in the near term. Weak overnight cues from the US markets kept the selling pressure on though the Indian equities recorded smart gains on a robust gross domestic product (GDP) data for the July- September 2010 quarter. Worries on contagion in Euro zone debt crisis also refused to go away in spite of the EUR 85b bailout of Ireland. CDS on Spain and Portugal jumped to records yesterday. Meanwhile, yield on Spanish and Portugal bonds also jumped with spreads over German bunds continuing to rise. EU Economic and Monetary Affairs Commissioner Olli Rehn urged Portugal to assure strong fiscal consolidation continuing in 2012 and beyond and emphasized that if growth proved to be somewhat lower than expected.



In Japan, stocks slipped after smart gains in the last session as the Japanese currency edged mildly higher. Bank Of Japan governor Masaka Shirakawa stated yesterday that a strong yen could have its benefits. Shirakawa argued that in from a longer-term perspective, stronger yen would bring about improvement of the terms of trade through a decline in import prices. The markets took a heavy beating with Japan's Nikkei 225 Stock Average plunging the most in seven weeks amid troublesome global climate. The benchmark Nikkei 225 Average plummeted 88.95 points or nearly 2% to 9,937. The index fell below the 10,000 mark for the first time since November 17.

On economic front, Japanese industrial production slipped lower, giving up by a seasonally adjusted 1.8% in October compared to the previous month, according to the latest Ministry of Economy, Trade and Industry (METI) report. This was the fifth consecutive drop for the barometer. However, on an annual basis, industrial production added 4.5%. Further, Japan manufacturing PMI rose slightly to 47.3 in November while Unemployment rate unexpectedly rose to 5.1% in October.

The Australian stocks ended lower in tune with the global peers as market slid on Europe's sovereign debt woes and worries China rate hike would hurt the export revenue of the local firms. Banks and resources mostly ended lower with losses of around 0.60-1%. The benchmark S&P/ASX200 index closed down 34.2 points, or 0.77% at 4,584.3.

In China, stocks eased after media reports stated that an economist with the Chinese Academy of Social Sciences suggested that the Chinese central Bank will need to hike by another 200 basis points, or 2% to fight against inflation considering the level of excess liquidity the world is facing. Stocks dropped around 3% in intraday moves with the lack of any upbeat movement in global risk appetite fuelling losses. Some gains emerged in the second half of the session but the benchmark Shanghai Composite Index closed down 46.18 points or 1.61% to 2,820.18.

In Mumbai, the key benchmark indices reversed initial losses as robust Q2 September 2010 GDP growth data and a pick-in up subscription for the initial public offer of state-run MOIL on the last day of the bidding for the issue by qualified institutional buyers today, 30 November 2010, boosted investor sentiments. The BSE 30-share Sensex was provisionally up 117.77 points or 0.61% to 19,522.87. The market breadth was strong, in contrast with a negative breadth at the onset of the trading session

India's economy expanded by an impressive 8.9% in the July to September quarter as against 8.6% in the same period of the previous fiscal year, the Commerce & Industry Ministry said on Tuesday. These figures have lifted hopes of meeting the Government's annual target of 8.75%. Meanwhile, the GDP figure for the April to June 2010-11 period was revised to 8.9% versus a preliminary estimate of 8.8%.

The US dollar hit a fresh 10-week high of 1.3036 against the Euro in London trades today, despite the strong labor market data from Germany. Commodities were still trading strong with the crude oil prices hitting highs near $86 per barrel. Gold and copper also added sharp gains.