Asian Markets Falter, Eyes on US Fed Rate Decision
Asian markets were mostly lower Tuesday, ahead of an expected 10th rate cut by the U.S. Federal Reserve since the financial crisis began and likely dismal results from Goldman Sachs, while the dollar hit a two-month low against the euro.
The Fed is widely seen chopping its benchmark rate by at least a half-a-percentage point to 0.5 percent later on Tuesday. And as rates head close to zero, investors will focus on whether the central bank elaborates on what further easing measures it will take to push the world's largest economy out of recession
Sentiment was also dented by concerns over which financial companies would be exposed to an alleged $50 billion fraud involving investment manager Bernard Madoff. Also weighing on stocks will be an International Monetary Fund report saying Chinese economic growth could be almost halved next year, coming hard on the heels of data showing China's factory output growth slumping to a record low.
The euro edged up against the dollar, having touched a two-month high at about $1.3725. The dollar has had a sharp turn lower in December and analysts say this is because the capital U.S. investors took back home in the last several months has begun to slowly flow overseas again. The dollar dipped against the yen but stayed above a 13-year low of 88.10 yen hit on Friday.
Oil prices fell to below $45 a barrel as fears of a poor economic outlook was balanced against supply concern in some commodities.
Japan's Nikkei 225 Average closed 1.1 percent lower as trade slowed with market attention turning to the Federal Reserve board meeting, while exporters such as Honda Motor were hurt by a stronger yen. Sony slid after a brokerage downgrade that said the company had been slow to react to the current crisis compared to its peers.
Seoul shares ended higher after volatile trade, erasing losses of up to 1.8 percent to rise for two consecutive sessions as automakers and financials climbed on continuing hopes of support
from global governments. Hyundai Motor gained 5.56 percent and Hana Financial Group ended up 6.2 percent.
Australian stocks fell 1 percent as top phone company Telstra slid and Macarthur Coal lost 22 percent after cutting its earnings forecast on slumping global demand. Telstra sank 3 percent, adding to a 12 percent drop on Monday, after the government rejected its A$10 billion (US$6.7 billion) plan to build a national broadband network, which could dent its market share beyond 2010.
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Hong Kong shares edged 0.6 percent higher, with China property counters leading the charge on talk of another interest rate cut on the mainland before the end of the year. China Overseas Land Investment led gains on the main index with a 4.5 percent rally on talk of interest rate reductions and tax cuts on property transactions on the mainland. Guangzhou R&F Properties, which operates in southern China, one of the worst affected regions in this year's property price free fall, soared over 12 percent at one point. The stock has fallen more than 75 percent this year, far underperforming the 46 percent drop on the main index.
Singapore's Straits Times Index closed 0.4 percent higher with financials such as United Overseas Bank on the decline. Economic growth this year could be weaker than forecast, as the trade-dependent country suffers from a slowdown in the global economy. "We believe the growth for this year will come slightly below our earlier projections of 2.5 (percent)," Lim Hng Kiang told reporters on the sidelines of an ASEAN trade meeting.
China's stock market gained 0.5 percent in shrinking turnover, dragged down by evidence that the slowdown in Chinese corporate profits was worsening. China Cosco, the country's largest shipping group, tumbled after saying potential losses on its hedging of freight rates had jumped to nearly 4 billion yuan ($585 million) because of the plunge in rates this quarter.