A credit ratings downgrade for U.S. banking giant Citigroup sent Asian financial stocks lower Friday, while the yen sagged after Japanese business sentiment dropped to two-year lows.
Developments Thursday were a mixed bag for investors with solid U.S retail sales helping ease fears that the world's biggest economy was sliding into a recession.
Moody's Investors Service cut its ratings on Citigroup debt by one notch, the latest blow to the largest U.S. bank and a further setback for markets trying to recover from the subprime mortgage crisis. This follows warnings from Lehman Brothers about further write-downs due to the credit market crisis highlighted the ongoing threat to financial companies from the subprime mortgage meltdown.
Moody's action on Citi deepened the gloom on a sector already hit by disappointment over the Federal Reserve's modest 25 basis point rate cut this week and doubts about a global plan to tackle the credit problem. Australia's top investment bank, Macquarie Group, Japan's biggest bank Mitsubishi UFJ and South Korea's top lender Kookmin Bank all finished sharply lower.
Resource stocks were also under pressure amid concerns that slower global growth will crimp demand for their products. BHP Billiton and energy firm Inpex Holdings both declined.