HONG KONG: Asian stocks slumped on Wednesday, sending investors fleeing to less risky bonds, after unexpectedly weak service sector data in the United States and Europe fueled fears of a recession. Worries about the fate of US bond insurers also contributed to the sell-offs, despite talk of various rescue plans, after Standard & Poor's on Tuesday warned the ratings of US banks could be at risk.
Tokyo's benchmark Nikkei index fell 4 per cent, while Hong Kong opened 5.4 per cent lower and Singapore slumped 3.9 per cent. The MSCI's measure of Asian stocks excluding Japan fell 1 per cent as of 0130 GMT. Australian stocks also fell, hurt by a 5.6 per cent decline in BHP Billiton after the world's biggest miner launched a hostile $147.4 billion bid for Rio Tinto Rio was up 1.6 per cent, but analysts were sceptical the bid would be successful.
Trading was thinner than usual, with markets in South Korea, Taiwan, and China already closed for the rest of the week for the Lunar New Year holiday. "It cannot be helped. The market is being hit by US recession fears," said Yoshihiro Ito at Okasan Capital Management in Tokyo.
"The impact of subprime (mortgage) problems is spreading into the broader US economy," Ito added The vast US services sector unexpectedly retrenched to recessionary levels in January, data on Tuesday showed, while euro zone services growth slowed to a near-halt, casting doubts about the outlook for Asian exports.
FLEEING FOR SAFETY
Expectations that the European Central Bank will cut interest rates later this year kept the euro steady against the dollar, but the Japanese yen rose as the global stock slide sparked unwinding of risky carry trades. Carry trades involve investors borrowing low-yielding currencies such as the yen to fund purchases of riskier assets which offer the potential of higher yields, such as stocks or commodities.
Bonds in the region were well bid as investors sought to avoid the slump in equity markets. Japanese government bond futures jumped by more than half a point in early trade, while Australian bonds extended a recent rally. But a further decline in the US dollar could bring more bad news than good for the credit ratings of foreign governments, rating agency Moody's Investor Service said in a report on Tuesday.
The weakening dollar would for many countries reduce the value of dollar-denominated debt, which would be positive for a sovereign bond issuer. But it could hurt trade competitiveness, increase inflation in countries with currencies pegged to the dollar, and weigh on the value of huge storehouses of foreign exchange reserves.
Oil prices extended their decline to just above $88 a barrel as the weak US economic data reinforced fears that the world's largest economy is on the brink of a recession. US light crude fell 20 cents to $88.21 a barrel, adding to previous session's 1.8 per cent drop.
Gold bounced back after falling a day earlier to its lowest level in almost two weeks, with spot prices last quoted at $887.50/888.30 an ounce. Platinum rose to $1,767/1,772 in Asian trade.
Tokyo's benchmark Nikkei index fell 4 per cent, while Hong Kong opened 5.4 per cent lower and Singapore slumped 3.9 per cent. The MSCI's measure of Asian stocks excluding Japan fell 1 per cent as of 0130 GMT. Australian stocks also fell, hurt by a 5.6 per cent decline in BHP Billiton after the world's biggest miner launched a hostile $147.4 billion bid for Rio Tinto Rio was up 1.6 per cent, but analysts were sceptical the bid would be successful.
Trading was thinner than usual, with markets in South Korea, Taiwan, and China already closed for the rest of the week for the Lunar New Year holiday. "It cannot be helped. The market is being hit by US recession fears," said Yoshihiro Ito at Okasan Capital Management in Tokyo.
"The impact of subprime (mortgage) problems is spreading into the broader US economy," Ito added The vast US services sector unexpectedly retrenched to recessionary levels in January, data on Tuesday showed, while euro zone services growth slowed to a near-halt, casting doubts about the outlook for Asian exports.
FLEEING FOR SAFETY
Expectations that the European Central Bank will cut interest rates later this year kept the euro steady against the dollar, but the Japanese yen rose as the global stock slide sparked unwinding of risky carry trades. Carry trades involve investors borrowing low-yielding currencies such as the yen to fund purchases of riskier assets which offer the potential of higher yields, such as stocks or commodities.
Bonds in the region were well bid as investors sought to avoid the slump in equity markets. Japanese government bond futures jumped by more than half a point in early trade, while Australian bonds extended a recent rally. But a further decline in the US dollar could bring more bad news than good for the credit ratings of foreign governments, rating agency Moody's Investor Service said in a report on Tuesday.
The weakening dollar would for many countries reduce the value of dollar-denominated debt, which would be positive for a sovereign bond issuer. But it could hurt trade competitiveness, increase inflation in countries with currencies pegged to the dollar, and weigh on the value of huge storehouses of foreign exchange reserves.
Oil prices extended their decline to just above $88 a barrel as the weak US economic data reinforced fears that the world's largest economy is on the brink of a recession. US light crude fell 20 cents to $88.21 a barrel, adding to previous session's 1.8 per cent drop.
Gold bounced back after falling a day earlier to its lowest level in almost two weeks, with spot prices last quoted at $887.50/888.30 an ounce. Platinum rose to $1,767/1,772 in Asian trade.
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