Asian markets were mixed Thursday, as investors' willingness to take on risk was limited to defensive plays, while the dollar and yen rose as central banks in the UK and Europe prepared to cut interest rates to their lowest in years.
The European Central Bank and the Bank of England on Thursday are expected to join central banks from Thailand to New Zealand in drastically reducing interest rates in response to a deep and potentially prolonged global economic downturn. Thailand on Wednesday cut its benchmark by a full percentage point, while New Zealand slashed them by a record 150 basis points to their lowest in five years.
Oil prices fell below $46 a barrel to almost four-year lows as fears of deepening economic woes overshadowed bullish weekly U.S. oil stocks data, while gold was range-bound after slumping nearly 2 percent on Wednesday. Meanwhile, the dollar edged lower against the yen , above Wednesday's five-week low of 92.53 yen.
Japan's Nikkei 225 Average closed down 1 percent as profit concerns in the global economic downturn hit exporters such as Honda Motor, with merger news from Nippon Oil failing to provide support. Refiner Nippon Oil and sixth-ranked Nippon Mining both surged 11 percent after confirming they plan to mergeto better compete amid sliding prices and slower demand. But in other merger news, shares of Sanyo Electric tumbled 11.8 percent after the Nikkei business daily Panasonic had raised its buyout offer for Sanyo in the hope of closing a deal this week.
Seoul shares ended down 1.6 percent, erasing earlier gains of nearly 2 percent as financials like Hana Financial Group sank, while grim reports about the fate of U.S. automakers dampened sentiment.
Australian shares finished flat, ignoring a rally on Wall Street, with the market capped by global miner Rio Tinto's 12 percent drop on speculation it may need to raise capital to cut its gearing. Major banks such as Commonwealth Bank, posted solid gains after U.S counterparts Citigroup and Bank of America rallied on positive monthly mortgage application data in the world's biggest economy. Local banks were also helped by news that troubled investment house, Babcock & Brown, has been given some breathing space through a A$150 million loan from its lending syndicate.
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Hong Kong shares reversed gains to close 0.6 percent lower as investors dumped local developers after banks raised their mortgage rates, while financial stocks rose in response to China's planned measures to further boost liquidity. China's top lender ICBC gained 2.3 percent, while smaller rival China Construction Bank rose 1.2 percent. These banks would likely benefit from Beijing's plan to spend $586 billion on infrastructure, Citi said in a report.
Singapore's Straits Times Index was up 0.2 percent. Olam International rose 10.8 percent after saying it planned to repurchase outstanding convertible bonds. Olam estimated it would repurchase up to $150 million of $300 million worth of convertible bonds that were issued in July and were due in 2013, in a tender offer to bondholders.
China's Shanghai Composite Index closed 1.8 percent higher, buoyed by hopes for further economic stimulus steps after the government pledged to use financial policy to support the economy and stock market. Blue chips were bought across the board but financials were particularly strong, with China Life Insurance.