Asian stocks resume decline, dollar supported

Monday, 15 November 2010 22:48 - - {{hitsCtrl.values.hits}}

SYDNEY (Reuters) - Asian stocks fell to two-week lows on Monday while the dollar rose as worries that China will tighten monetary policy and persistent concerns about the euro zone debt crisis kept investors cautious.

European shares are expected to open lower, extending losses for the fourth session, hurt by concerns over Ireland’s debt woes and a sell-off in metal prices.

Bargain hunting in early Asian trade quickly gave way to more selling as Chinese stocks struggled following a 5.2 percent slide on Friday, when fears China will lift rates gripped markets.

Analysts expect more market volatility toward the year-end as Chinese authorities are seen taking further steps to keep in check liquidity in the financial system.

“An imminent interest rate rise after recent bank reserve increase is still very likely,” said a trader at a Shanghai securities house.

Reversing earlier gains, the MSCI index of Asia Pacific stocks outside Japan fell 0.7 percent to reach lows not seen since November 1. On Friday, the index slid 1.9 percent to post its biggest one-day percentage fall since late June.

There was also little clarity on Ireland’s funding problems after the country did not rule out the possibility it may have to turn to Europe for help in dealing with its debt crisis, but said no application had been made for assistance yet.

Markets drew no comfort from the G20 and APEC meetings, which left leaders of the world’s most powerful economies little closer to agreeing on how to prevent fresh crises.

Many analysts said markets had been due for a pullback regardless, as profit taking set in after a two-month-long rally and traders prepared to close their books heading into the year-end.

Australia’s S&P/ASX 200 index slipped 0.1 percent, Hong Kong’s Hang Seng index <.HSI> shed 0.2 percent while the Shanghai Composite Index was up 0.2 percent, having drifted in and out of negative territory.

Japan’s Nikkei average however, climbed 1.1 percent as exporters such as Canon Inc benefited from a weaker yen and data showing Japan’s economic growth accelerated in the third quarter spurred investors to buy on dips.