GLOBAL MARKETS-Oil prices, econ worries hit Asian stocks
* Oil prices rise, above $126 a barrel
* Asian stocks hit on inflation and global growth worries
* Gold gains, benefits from safe-haven appeal
(Repeats to more subscribers)
By Rafael Nam
HONG KONG, Aug 4 (Reuters) – Asian stocks fell on Monday as a rebound in oil prices to
above $126 revived inflation concerns at a time when major economies such as the United
States and Japan are already seen headed for tough times.
A steep quarterly loss at U.S auto maker General Motors Corp <GM.N> and a contraction in
U.S jobs announced on Friday spell trouble for Asian manufacturers which rely heavily on
U.S. demand.
The dollar dipped against the yen but held near Friday’s five-week high against the euro
as investors sold other major currencies amid mounting evidence that the U.S. credit and
housing woes are spreading to other parts of the world.
Gold regained its safe-haven appeal to rise on Monday, though regional bonds dipped
ahead of a slew of central bank policy meetings this week including in South Korea, Australia
and the United States.
The confluence of negative factors are pointing to a continued period of market volatility,
analysts said.
”The still-high oil price, slowing growth virtually everywhere, profit downgrades,
inflation worries and the continuing credit crunch are all big short-term headwinds for shares
and are likely to ensure a rough ride,” said Shane Oliver, head of investment strategy and
chief economist at AMP Capital Investors in Sydney.
The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> was down 0.8 percent at
0230 GMT.
South Korean stocks suffered a steep fall, with the KOSPI <.KS11> index down 2.3 percent
after a recent batch of cancelled orders sent shipbuilder shares such as Daewoo
Shipbuilding and Marine Engineering <042660.KS> plunging.
Shares in Shanghai <.SSEC>, Singapore <.FTSTI> and Hong Kong <.HSI> were all down
around 1 percent, while benchmark stock indices in Australia <.AXJO> and Taiwan <.TWII>
were little changed.
Tokyo’s Nikkei index <.N225> fell 1 percent as Japanese auto makers Honda Motor
<7267.T> and Toyota Motor <7203.T> slipped on worries about reduced U.S. demand for
their vehicles. Honda fell more than 5 percent, while Toyota fell nearly 4 percent.
U.S. RECESSION?
Concerns about a possible U.S. recession were reinforced by data on Friday showing the
unemployment rate hit its highest in four years in July, as employers cut jobs for a seventh
consecutive month, though less severely than expected. [ID:nN01429062
U.S. corporate profits are being hit, with General Motors reporting a $15.5 billion quarterly
loss on Friday, while data showed U.S. auto sales plunged to a 16-year low in July.
[ID:nN01288721] and [ID:nN01496226]
Slowing demand from the world’s largest economy is taking a toll on the global economy.
Data due to be released later this week is expected to show Japan’s economy probably
shrank 0.6 percent in the second quarter, ending three consecutive quarters of expansion.
[ID:nT205687]
Adding to global growth woes was a rebound in the price of oil as concerns over Iran’s
nuclear activities, violence in OPEC member Nigeria and a tropical storm in the Gulf of
Mexico sparked concerns over supply. Oil had tumbled last month on concerns that record
prices were dampening energy demand.
U.S. light crude for September deliver <CLc1> was up $1.13 at $126.23, still below the
record above $147 a barrel hit on July 11.
How to respond to rising inflationary pressures and slowing economic growth is shaping
up as a key debate for central banks around the world.
The Federal Reserve meets on Tuesday amid expectations it will keep U.S. interest rates
steady at 2 percent, while acknowledging financial conditions remain strained and reiterating
concerns about inflation. [ID:nN03323846]
The European Central bank is expected to raise interest rates for the first time im nore
than a year on Thursday as it tries to cool inflation. [ID:nL30302522]
The dollar dipped to 107.56 yen <JPY=>, down 0.1 percent from late U.S. trade last week,
but was little changed against the euro at $1.5574 <EUR=>.
The worsening outlook for auto makers dented the appeal of metals such as platinum
<XPT=>, with spot prices falling to $1,617.50 an ounce, its lowest level since late January.
But gold <XAU=> rebounded on Monday to $913.25/914.25 an ounce as investors sought a
safe haven.
Regional bonds, however, fell ahead of central banks meetings. Japan’s September
10-year JGB futures <2JGBv1> was down 0.13 point at 136.59 ahead of a key auction on
Tuesday.
