Asia stocks slip on economy fears, cut losses

HONG KONG (AFP): Asian stock mostly fell Tuesday, extending recent losses amid fears about the global economy but well off the troughs seen earlier as dealers looked to a key meeting of the US Fed later in the day.

Gold soared to record levels and crude prices fell, Asian stocks plunged in the morning despite G7 and G20 pledges to bolster the global economy and European Central Bank action on eurozone debt.

However, hopes the US central bank could outline plans for a new stimulus package later Tuesday provided support to investors who had gone into selling mode after the US debt downgrade by Standard & Poor’s last week.

Tokyo ended 1.68 percent, or 153.08 points, lower at 8,944.48 -- after tumbling 4.40 percent at one point -- while Hong Kong halved its earlier falls to sit just three percent lower in the afternoon.

Seoul closed 3.63 percent, or 68.10 percent lower at 1,801.35 -- staging a huge rebound after falling about 9.9 percent in the morning.

Taipei fell 0.79 percent, or 59.68 points, to 7,493.12, having earlier shed five percent.

However, Sydney staged a massive turnaround after slumping five percent in morning trade. The market closed 1.22 percent, or 4.87 points, up at 4,034.8.

And Shanghai bounced back to be flat after data showed inflation had edged up slightly.

“There seems to be some optimism coming through markets that Ben Bernanke might outline plans for a QE3 package this evening,” said IG Markets analyst Ben Potter.

“Even if he does mention this, there will be a lot of speculation as to whether or not it will actually make much difference given the wildly divergent views as to the effectiveness of the previous packages.”Fear continued to dominate after the historic downgrade of the United States by Standard & Poor’s on Friday and a warning from the head of the European Commission Thursday that the debt crisis in the eurozone had likely spilt over into other economies.

“S&P’s downgrade of the US credit rating is yet another demand from Wall Street for QE3 (quantitative easing), which their own private bank, the Federal Reserve, will no doubt deliver shortly,” said a fund manager at Grand Private Equities Wesley Legrand.



Shanghai reversed its losses after China announced inflation had hit 6.5 percent in July, a more than three-year high, amid hopes that the price rises had levelled out and the government would ease up on its rate hikes.

Asian stocks slumped on opening after Wall Street suffered its steepest one-day drop since late 2008 on Monday, with the Dow Jones Industrial Average falling 5.55 percent, the broader S&P 500 down 6.7 percent and the tech-heavy Nasdaq diving 6.9 percent.

Gold, viewed as a safe haven in financial turmoil, hit a record high $1,772.09 an ounce in Hong Kong trade.

The euro bought $1.4191 in early Asian trade on Tuesday, almost flat from $1.4179 in New York late Monday, while it eased to 110.36 yen from 110.27.

The dollar stayed weak against the Japanese currency, trading at 77.31 yen against 77.68 yen in New York.

The debt fears also weighed on the Australian dollar, which briefly fell below parity with the greenback for the first time since the Japanese earthquake in March.

In early afternoon trade the “Aussie” was at 99.42 US cents, down from 103.55 cents on Monday but it later returned to 102.14.

On oil markets New York crude sank below $80 in Asian trade and its Brent counterpart briefly dropped under $100.

New York’s main contract, West Texas Intermediate (WTI) light sweet crude for delivery in September shed $2.35, or 2.89 percent, to $78.96 per barrel at 0600 GMT, a level it has not seen since September 30, 2010.

WTI prices had plunged $5.60, or 6.89 percent, to a low of $75.71 in intra-day trade before clawing back some ground.

Brent North Sea crude for September delivery slipped $1.82, or 1.75 percent, to $101.92. It had earlier sunk below $100, a level it had not breached since February 8.

In other markets:

-- Manila ended 4.02 percent, or 174.21 points, lower at 4,157.03.

The fall is the index’s biggest since March 16, 2009.

Philippine Long Distance Telephone closed five percent lower at 2,244 pesos, Aboitiz Equity declined 3.3 percent to 38.65 pesos and San Miguel dived 4.3 percent to 114 pesos.

-- Wellington fell 2.75 percent, or 87.67 points, to 3,097.78.

Telecom Corp fell 4.6 percent to NZ$2.37, Fletcher Building slid 3.7 percent to NZ$7.20 and Air New Zealand was flat at NZ$1.08.