January 17, 2008
I just found this article after I sent you my ramblings. What happens in the U.S. affects everyone worldwide. It pays to be aware of the world around us.
Reuters
Asian stocks dive anew on U.S. recession fears
Thursday January 17, 10:29 pm ET
By Tom Miles
HONG KONG (Reuters) - Asian stocks tumbled anew on Friday after the latest salvo of sour signals about the U.S. economy pummeled Wall Street, sending the benchmark S&P 500 (^SPX - News) down 3 percent to a 15-month nadir.
Fears about a possible recession in the United States, Asia's biggest export market, also sent government bonds surging to multi-year highs and pushed U.S. crude oil prices below $90 a barrel.
The dollar struggled near a 2- year low against the yen after U.S. Federal Reserve Chairman Ben Bernanke told lawmakers that more interest rate cuts may be needed to counter a worsening economic outlook.
The Chicago Board Options Exchange Volatility Index (Chicago Options:^VIX - News), the so-called fear index which measures projected U.S. stock market volatility, leapt 16.7 percent overnight.
"It's a hopeless situation. Buying appetite is evaporating as more investors are turning pessimistic about the U.S. economy. Markets could continue to fall in the months ahead," said Kim Young-gak, an analyst at Hyundai Securities in South Korea.
Japan's Nikkei average (Osaka:^N225 - News) ended the morning session down 2.8 percent after hitting its lowest level since late 2005.
MSCI's measure of other Asia Pacific stocks (^MIAPJ0000PUS - News) was down 2.4 percent by 0300 GMT. The index is already down almost 10 percent since January 1.
Exporters such as Sony Corp (Tokyo:6758.T - News) wobbled as investors chewed on a slowdown in U.S. factory activity and a hefty loss at Merrill Lynch & Co Inc (NYSE:MER - News) .
"Japanese stocks are oversold, but we've got a typhoon, an earthquake and a tsunami coming at the same time," said Hiroichi Nishi, a general manager of equity marketing at Nikko Cordial Securities.
Australian investors, who have already endured their longest losing streak for more than 12 years, sent the benchmark S&P/ASX 200 index (ASX:^AXJO - News) down more than 2 percent and into the red for the 10th session in a row.
In Seoul, the Korea Composite Stock Price Index (KSE:^KS11 - News) was down 1.9 percent after hitting its lowest since August 17. But Korean banks (KSE:^KS51 - News) beat the trend on hopes of improving lending margins, liquidity and delinquency rates.
OIL, GOLD SLIDE
With fears of a U.S. recession darkening the outlook for the global economy, oil and commodities demand is also looking less rosy.
Gold trickled down towards $870 an ounce after falling around 1 percent in New York. The safe-haven metal has sagged after Monday's record price of $914, with demand worries compounded by investors selling to cover losses elsewhere.
U.S. crude oil, which topped the $100 barrel mark on January 3, fell 42 cents to $89.71 in Asian trade on concerns a potential recession would dent demand.
"There are concerns about the U.S. economic outlook. There are other factors -- the weather conditions in North America are warm and there has been no significant demand for heating purposes," said Gerard Burg, analyst of National Australian Bank.
The bleak assessment of the U.S. economy was echoed on Thursday by the Fed's Bernanke, who reiterated that the Fed was ready to act aggressively and threw his support behind other efforts to counter the risk of recession.
His comments, combined with patchy earnings and weak economic data, hammered Wall Street and worsened the picture for Asia's exporters, such as Taiwanese tech stocks.
Taipei's main TAIEX share index (Taiwan:^TWII - News) fell 1.2 percent after a 4 percent drop in the previous two sessions.
"The market is a bit over-reacting unless we really see some very bad U.S. technology earnings, and from Bernanke's speech, it seems like the U.S. government will be doing everything they can to help the situation," said Alex Huang at Mega Securities.
DOLLAR STRUGGLES
Investors took Bernanke's comments as a signal that the U.S. central bank was willing to cut the benchmark fed funds rate aggressively from the current 4.25 percent later this month.
"The fact that Bernanke indicated the need for aggressive rate easing again led investors to believe that the U.S. economic outlook is very bleak and that the Fed will cut interest rates further after this month," said Minoru Shioiri, senior manager for forex trading at Mitsubishi UFJ Securities.
"That is definitely negative for the dollar," Shioiri said.
The dollar was at 106.75 yen, not far from a 2- year low of 105.92 yen struck earlier in the week.
The search for a safe haven bolstered U.S. Treasury two-year notes, pushing their yield down 11 basis points to 2.41 percent, the lowest in more than three years. The yield on the five-year Japanese government bond also hit a two-year low on Friday, down two basis points at 0.840 percent.
(Additional reporting by Hugh Lawson; Editing by Lincoln Feast)
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