Asia marts down on US Fed worries

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HONG KONG: Asian markets fell on Tuesday following another weak lead from Wall Street, while attention returns to the US Federal Reserve’s stimulus program as the bank releases minutes of its latest policy meeting.

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Major European equities markets also ended in the red over Fed worries.

Emerging markets took a beating on expectations the Fed’s easing money will dry up, while their currencies also suffered heavy selling, with the Indian rupee hitting another record low against the dollar.

Tokyo tumbled 2.63 percent or 361.75 points to 13,396.38 as the dollar gave up earlier gains against the yen, while Sydney slipped 0.67 percent or 34.3 points to 5,078.2, and Seoul lost 1.55 percent or 29.79 points to end at 1,887.85.

In the afternoon Hong Kong fell 1.9 percent and Shanghai was off 0.64 percent.

Jakarta was more than 4.50 percent down, extending a 5.58 percent fall on Monday, while Bangkok lost nearly 3 percent and Kuala Lumpur shed 1.90 percent.

Manila’s market was closed for a second straight day as the Philippine capital was hit by floods.

Global markets have been in turmoil as investors fret over the future of the $85-billion-a-month Fed stimulus.

Traders are worried that the improving economic condition in the United States means the economy will not need the help the central bank has been providing.

The Fed has said that it will turn the tap off once unemployment is low enough and the economy is able to stand on its own.

Despite this, US Treasury yields are approaching two-year highs.

With the US showing signs of improvement, analysts said that the Fed will likely slow its bond-buying, which in turn will lead to higher rates at home and a repatriation of the money that flooded emerging markets when the scheme was unveiled.

However, Evan Lucas, market strategist at IG in Melbourne, told Dow Jones Newswires: “There is no reason for Treasury yields to be this high.

“Inflation is near zero, official rates are not expected to be changed until 2015 and the underlying credit market is still shaky from uneven economic data.”

Eyes are on the release on Wednesday of minutes from the Fed’s most recent meeting, with bank watchers looking for clues about its next move. Wall Street, which on Friday ended one of its worst weeks of 2013, extended those losses on Monday. The Dow fell 0.47 percent, the S&P 500 lost 0.59 percent, and the Nasdaq shed 0.38 percent.

With yields rising in the United States, the US dollar also climbed against emerging units.

It hit a record 64.05 Indian rupees while also buying 10,490 Indonesian rupiah, near a four-year high, from 10,419 rupiah. And the Thai baht was at a one-year low of 31.61 to the dollar, compared with 31.34 baht Tuesday.

The rupee is Asia’s worst-performing major currency this year, falling 16 percent against the dollar as the Fed’s wind-down added to mounting concerns about the state of India’s ailing economy.

However, it fell to 97.27 yen, compared with 97.56 yen in New York City on Monday, after peaking at 97.85 yen in morning trade Tuesday.

The euro bought $1.3337 and 129.74 yen, against $1.3334 and 130.09 yen.

European stocks retreat

In Europe, main stock markets finished in the red on Monday amid low trading volumes, as investors awaited further indications on when the Federal Reserve plans to reduce its huge stimulus program.

London’s FTSE 100 index of leading shares lost 0.53 percent to close at 6,465.73 points, and Frankfurt’s DAX 30 dipped 0.31 percent to end at 8,366.29 points.

In Paris, the CAC 40 in Paris fell 0.97 percent to 4,083.98 points.

“It appears that everyone in the city is still either asleep or on holiday with low trading volumes and a blank macro calendar unlikely to stir anyone into action in the short term, as we all wait for Wednesday’s Fed minutes and any clues on the potential scale of the tapering plan that the market now seems convinced will begin in September,” CMC Markets UK trader Ankit Kapur said.

AFP

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