Asian stocks down after Wall Street drifts

HONG KONG, (AFP) - Stocks in Asia dropped on Wednesday after an uninspiring overnight performance from Wall Street and a muted response to news of the Portuguese bailout.

Sydney fell 0.71 percent and Seoul was off 1.06 percent. Hong Kong plunged 1.14 percent on opening before making up some ground as the morning wore on.

Shanghai shed 0.94 percent in early trade as investors continued to fret about possible further monetary tightening measures, dealers said. Tokyo was closed for a national holiday.

“The market environment remains one of rising risk aversion, with commodities facing the brunt of pressure,” Credit Agricole said in a note to clients.

“News that Portugal has finally reached an agreement with the European Union/International Monetary Fund over a bailout for the country has been greeted with a muted response so far,” it said, according to Dow Jones Newswires.

Portugal’s government announced Tuesday it had inked a 78 billion euro ($116 billion) deal with the European Central Bank, European Union and International Monetary Fund after a two-week negotiation.

The plan calls for the loosening of deficit reduction targets for Portugal, whose economy is expected to shrink this year as it implements austerity measures.

Lisbon was forced to go cap in hand to the troika last month after its government resigned when the rejection of a fourth round of austerity measures sent borrowing costs rocketing.

Lisbon has to have the bailout package in place by June 15 when it has to repay nearly 5.0 billion euros ($7.3 billion) in maturing debt.

Australia’s headline stock index hit a five-week low of 4,752.2, dragged down by the energy and materials sectors after recent commodity price declines.

BHP Billiton was down 0.5 percent, Rio Tinto shed 1.1 percent and Woodside Petroleum dropped 1.9 percent. “I think we hit the top of the (S&P/ASX 200’s) range near 5,000 and it’s been too easy for offshore investors to take profits with the (Australian) currency having spiked up to $1.1010,” said BBY senior institutional trader Peter Copeland.

The Dow Jones Industrial Average ended Tuesday virtually unchanged at 12,087.51, but the broader S&P 500 index shed 4.60 points (0.34 percent) to 1,356.62, while the tech-rich Nasdaq Composite fell 20.22 points (0.71 percent) to 2,841.62.

US stock markets were following others down -- the dollar, oil, gold and silver all tumbled.

But in Asian trade on Wednesday, the dollar rose against the euro as skittish short-term investors took profit ahead of a European Central Bank (ECB) meeting, analysts said.

The euro changed hands at $1.4794 in early Asian trade from $1.4823 in New York on Tuesday. Against the Japanese yen, the European currency bought 119.69 yen from 120.02, and the greenback traded at 80.91 yen from 80.98.

Analysts said the ECB was expected to keep its key interest rate at 1.25 percent when it meets on Thursday, but might signal a further increase amid climbing prices in the 17-nation eurozone.

Gold continued to drop, opening in Hong Kong at $1,531.50-$1,532.50 an ounce, down from Tuesday’s close of $1,542.50-$1,543.50.

Oil prices fell on slumping US demand, as data predicted a 3.2 million barrel gain in crude inventories, larger than analysts’ forecasts.

New York’s main contract, light sweet crude for delivery in June, shed 76 cents to $110.29 a barrel.

Brent North Sea crude for June delivery dipped 69 cents to $121.76.