Asia Rallies, Dollar Slips on Relief Over Citigroup
Asian markets were mostly higher while the greenback tumbled Monday on media reports the U.S. government could end up with as much as 40 percent stake in Citigroup. This sparked some relief among investors who cut their safety trades.
U.S. equity futures rose 1 percent after media reports the U.S. government may acquire up to 40 percent of Citigroup's common stock. Citi's stock price plunged around 44 percent last week.
The three havens that investors mainly bought last week on uncertainty about the fate of U.S. banks -- U.S. Treasuries, gold and the dollar -- dropped, as dealers sold first and worried later about the implications of such a big public stake in a major international bank.
The U.S. dollar fell across the board on the growing fears over potential bank nationalizations. Crude oil prices climbed above $40 a barrel.
The Nikkei 225 Average closed down about half a percent to a four-month closing low on fears about U.S. bank nationalization, but the report that the U.S. government may raise its stake in Citigroup pared earlier losses. The failure of SFCG, a high-interest lender to smaller companies, underscored worries about tightening credit hitting businesses throughout the Japanese economy and sent shares in rival firms such as Takefuji tumbling. The Nikkei lost 40.22 points to 7,376.16, its lowest close since Oct 27, after earlier falling as far as 7,209.43 -- in sight of the 26-year low of 6994.90 hit on Oct. 28.
South Korea's KOSPI finished 3.15 percent higher, ending a five-session losing streak as bank stocks rebounded, following those Citi reports. Top technology titles rallied. Hynix Semiconductor jumped 11.8 percent and LG Display climbed 5.1 percent. KB Financial Group reversed early loss to end up 4 percent.
Australian stocks ended down 1.5 percent, dragged by a big loss for miner Rio Tinto, but recovered from earlier lows on a report the U.S. government may raise its holding in Citigroup. The Citi reports sent banking shares briefly into positive territory, but they were mostly unable to sustain the rises. Top lender National Australia Bank ended 1.2 percent lower and No. 2 Westpac Banking fell 0.4 percent. Commonwealth Bank of Australia and Australia and New Zealand Banking Group eked out small gains.
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Hong Kong shares rose 3.8 percent as investors fled safe havens to dabble in stocks after some of the uncertainty surrounding U.S. banks was lifted, but HSBC lagged ahead of its earnings. New listing Real Gold Mining was trading at HK$6.39, trimming gains as the price of the precious metal fell in the spot market amid a rally in the stock market.
Singapore's Straits Times Index swung into positive territory, up 2.2 percent as investors bought local stocks and while the Singapore dollar rose on news of the possible Citi stake increase by the U.S. government. Bank stocks led the rise with UOB and DBS Group both climbing.
China's Shanghai Composite Index rose 2 percent, led by property shares after official media said the government was considering a package of measures to provide long-term support for the residential housing market. Shenzhen Development Bank jumped its 10 percent daily limit on renewed speculation that China Development Bank might buy a stake in it.