Asian markets hit by ECB disappointment
Asian markets mostly fell and the euro came back under pressure on Friday after the European Central Bank dashed traders’ hopes for strong policy actions to support troubled eurozone economies. Downbeat earnings reports from two of Japan’s biggest electronics firms also weighed on the Nikkei, with Sharp losing more than a quarter of its value in the morning session.
Tokyo fell 1.13 per cent, or 98.07 points, to 8,555.11, Seoul shed 1.11, or 20.72 points, to 1,848.68, Sydney closed 1.12 per cent, or 48.0 points, lower at 4,221.5 and Hong Kong shed 0.12 per cent, or 24.02 points, to close at 19,666.18.
But Shanghai ended 1.02 per cent higher, adding 21.62 points to 2,132.80, after the country’s securities regulator said it would cut transaction fees on equity trading by 20 per cent from September 1.
Markets were deflated by the ECB’s decision to hold off any concrete moves to support the euro such as bond buying, which many had hoped for after bank chief Mario Draghi said last week it would do whatever was needed to save the euro.
On Thursday he reiterated that the ECB was ready to step into the bond markets—but not just yet.
Draghi insisted the onus was on eurozone governments, saying they must carry out promised reforms and turn to the region’s bailout funds before the ECB could step in.
In the face of growing pressure, the ECB “may undertake outright open market operations of a size adequate to reach its objective”, he said, but added that the details would be worked out “in the coming weeks”.
Whatever the circumstances, Draghi said it was “pointless” to bet against the euro. “It stays. It stays. It stays,” he insisted.
However investors, who had sent global markets surging over the past week as they factored in some sort of action, were unimpressed and Spanish borrowing costs bounced back above the seven per cent danger level.
“As we had feared, Draghi failed miserably to live up to the heightened market expectations of significant new measures to match his pledge last week to do whatever is necessary to preserve the euro,” Daiwa Capital Markets said in a note, according to Dow Jones Newswires.
The let-down came after the US Federal Reserve had said on Wednesday that it would take a wait-and-see approach before unveiling any stimulus for the world’s number one economy.
The news rippled around global markets, with London, Paris and Frankfurt all falling, while Madrid and Milan slumped.
On Wall Street the Dow fell 0.71 per cent, the Nasdaq lost 0.36 per cent and the S&P 500 dropped 0.74 per cent.
In foreign exchange trade the euro, which tumbled after the ECB announcement, remained under pressure in Tokyo as investors moved out of riskier assets and into safer bets such as the yen and dollar. The common unit bought $1.2235 and 95.70 yen in late afternoon trade, compared with $1.2178 and 95.26 yen in New York late Thursday.
It was still down from the $1.2250 and 96.12 earlier in Asia before the ECB meeting.
The dollar was at 78.21 yen from 78.22 yen.
The Daily Independent/Bangladesh/ 4th Aug 2012