Mixed finish for bullions as gold drops but silver rises
Asia-Pacific market dived deep into the red on Friday, registering third fall in last five sessions, as investors shaved off risky assets after ECB douses hopes it will ramp up its bond-buying plan and on fading hope the European leaders would produce a credible plan to solve sovereign debt crisis. Investors offloaded risky stocks on fear that failure of a crucial summit in Europe could spell the break up of the eurozone and would trigger financial turmoil across the globe.
Market largely ignored the release of lower-than-expected Chinese inflation data for November, as market is more concerned about future changes to government policy, and is still waiting for information about more potential loosening. China's November CPI rises 4.2% on year, slower than October's 5.5% on-year rise.
Risk aversion selloff triggered after the European Central Bank President Mario Draghi disappointed investors with only modest steps to revive its troubled economy. The ECB cut interest rates, but officials said there was no plan for major government bond purchases.
ECB President Mario Draghi said after the central bank's regular policy meeting that the eurozone's rescue fund, and not ECB, should be the main tool to fight bond market contagion. Nevertheless, the ECB did offer more measures to ease credit conditions as it cut its benchmark interest rate by 25 basis points to 1%, loosened collateral requirements for lending to banks, and extended loan maturities to as far as three years. He downgraded Europe's economic growth outlook to -0.4% and maintained inflation expectations at 1.5 to 2%.
Participant are fearing that without the ECB's active participation in purchasing sovereign debt in Europe, its harly possible to solve the current crisis.
Meanwhile, markets were knocked back further on fading hopes that euro bloc leaders would reach broad agreement on Friday to tackle the region's debt crisis after Germany rejected draft proposals that would increase the euro zone's firepower in dealing with the credit crisis. Germany rejected some measures in draft conclusions from the summit, including giving the European Stability Mechanism (ESM) a banking license and issuing common euro-zone debt.
Germany and France, the two biggest economies in the eurozone, had hoped to persuade all 27 members of the European Union to back a change to the EU treaty that would impose tight fiscal rules on its members- a modification thought necessary to extricate the region from its debt crisis. But after a late night of negotiations, Herman Van Rompuy, president of the European Council, announced Friday in Brussels a new treaty: one that will include the 17 eurozone states plus six other EU countries- not all 27 EU members. The news also follows disappointments.
European Union summit has failed to secure the full backing of the 27 nations for treaty changes to help fight euro-zone debt crisis by coordinating fiscal policy, many members reached an agreement to provide up to an extra 200 billion euros ($266.73 billion) to fight the crisis and to form a new fiscal compact. European Council President Herman Van Rompuy said in a press conference after the end of the first day of the summit on Thursday, 8 December 2011, that euro-area and other European states will aim to make the extra money available to the International Monetary Fund. Additionally, European Financial Stability Facility leverage will be rapidly available, he said.
Van Rompuy added that the participating states also agreed to new strong fiscal rules for Europe, including member states submitting draft budget plans to the commission for scrutiny. Excessive deficit procedure rules will be reinforced more automatically, he said. Van Rompuy also referred to private-sector involvement (PSI) in bailouts and said that the members in the new compact would "strictly adhere to IMF practice." Van Rompuy said that members hadn't yet come to an agreement on euro bonds but that euro-area member states would continue to work on fiscal integration. There would be an update on this issue in June 2012, he said.
Back to markets, the Tokyo stockmarket nosedived, dragging the benchmark Nikkei Stock Average 1.48% lower at 8,536.46, as investors dumped risky stocks on loosening hope the European leaders would produce a credible plan to solve sovereign debt crisis. Meanwhile yen appreciation against the euro and overnight falls in European and U.S. stocks also fueled selloff. Turnover transaction surged to the level last seen since Aug. 9, primarily due to price fixing associated with the expiration of monthly options and quarterly Nikkei futures.
Shares of Chip-related companies closed lower on worried over demand outlook after Texas Instruments' trimmed its fourth quarter guidance. Tokyo Electron fell 1.9% at 4,165 yen, Advantest 3% to 822 yen, and Renesas Electronics Corp 3.8% to 528 yen.
The Cabinet Office released GDP data on Friday, showing that Japan's economy expanded by a real 1.4% on quarter in July-September, revised down from a preliminary 1.5% rise in light of weaker capital investment and private consumption than initially estimated. Gross domestic product marked the first quarter-on-quarter gain in four quarters after -0.5% in Q2, -1.7% in Q1 and no growth in Q4 of 2010.
At an annualized pace, GDP rose 5.6%, revised down from a preliminary 6.0% rise, for the first growth in three quarters, instead of four quarters as reported in the preliminary data last month. In the latest estimate, GDP for the final quarter of 2010 was revised up to an annualized 0.1% rise from a contraction of 2.7%.
In Australia, the Sydney stock benchmark All Ordinaries Index tumbled 1.72% to 4,264.10, registering third day of weaker finish in last five, on heightening concerns about Europe's.
Financials companies suffered heavy losses on fears mounted that the escalating cost of raising money overseas would put pressure on Australian bank margins. Westpac Bank fell 2.1% to A$21.07, ANZ Bank 1.3% to A$20.85, National Bank of Australia 2.4% to A$24.02, and Commonwealth Bank 1.7% to A$48.84. Metal and mining stocks sank, suffered by weak finish of base metal on the London Metal Exchange on Thursday. Heavyweight BHP Billiton dropped 3.05% to A$35.86 and Rio Tinto 3.6% to A$63.74.
Harvey Norman fell 1% to A$2.09 after the Federal Court in Brisbane had fined the company worth of A$1.25 million for misleadingly advertising 3D televisions and not clearly stating some conditions in its catalogues.
Telecom heavyweight Telstra closed 1.2% lower at A$3.23. The Australian competition
regulator said on Friday it hopes to make a final decision in February on plans by telecom firm Telstra to hand over its fixed line network to the government for A$11 billion to help build a national broadband network. Telstra, which holds a 60 percent market share, will transform into a pure telecoms retailer after the separation.
In New Zealand, the Wellington stockmarket benchmark NZX 50 Index rose 1.52 points, or 0.05 percent, to 3271.46, shrugging off weak offshore and regional cues. Gains in NZ market was credited to Rakon that rebounded from a record low and Telecom gained to its highest level since the spin-off of its Chorus network unit last week.
New Zealand home sales jumped in November and the median price rose to a record, suggesting strengthening of the property market seen in Auckland is now becoming a nationwide phenomena. The number of sales rose 17 percent to 6,008 last month compared to November last year and was up 20 percent from October, according to the Real Estate Institute. The gain in the latest month was 4.3 percent on a seasonally adjusted basis.
Meanwhile, New Zealand consumers are feeling the heat of global economic conditions, with optimism falling for a fourth month in the lead-up to the important Christmas shopping period. The ANZ-Roy Morgan Consumer Confidence measure fell 0.6 points to 108.4 in December, and is 8 points below the historical average. The Current Conditions index rose 1.9 points to 102.5, while the Future Conditions index fell 2.4 points to 112.2.
In China, the Mainland stocks ended down for the fourth times this week, as investors shaved off risky assets on lingering concerns over a slowing domestic economy and losing hope that European leaders would produce a credible plan to solve the European debt crisis. The benchmark Shanghai Composite index closed 0.62% down at 2,315.27, its lowest level not seen since Mar. 25, 2009, (2,291.55). The index shed 1.9% this week.
Banks and financials tumbled on economic pessimism. China Minsheng Banking Corp. dropped 1.3% to 6.05 yuan and Bank of Communications 0.2% at 4.60 yuan. China Life Insurance shed 0.4% to 17.90 yuan.
Shares of automakers shaved off after the China Association of Automobile Manufacturers (CAAM) said on Friday that domestic vehicle sales fell 2.4% from a year earlier in November to 1.66 million units. FAW Car Co. dropped 2.8% to 7.86 yuan and SAIC Motor Corp. 1.2% to 13.43 yuan.
The National Bureau of Statistics announced CPI data for November on Friday, revealing that China's consumer price index (CPI), a main gauge of inflation, rose 4.2% year-on-year in November, further weakening from 5.5% in October. China's CPI hit a 37-month high of 6.5% in July this year.
Taking the first 11 months together, the CPI rose 5.5% year-on-year in January-November, well above the government's full-year inflation control target of 4%. Food prices, which account for nearly one third of the basket of goods in the nation's CPI calculation, went up 8.8% in November from a year earlier but dipped 0.8% month-on-month, according to the NBS.
China's Producer Price Index (PPI), a major measure of inflation at the wholesale level, rose 2.7% in November year-on-year, indicating subsiding inflationary pressure for December.
In Hong Kong, headline stocks were plummeted, weighing the benchmark Hang Seng index 2.73% down at 18,586.23, and registered third fall this week, as investors dumped riskier assets particularly financials, developers, and commodity linked stocks. Meanwhile sharp rise in fear gauge, an indication of potential downside risk, also triggered risk aversion selloff. The index fell 2.38% this week.
In India, the Bombay Stock Exchange benchmark Sensex plummeted 1.67% to 16,213.46, extending yesterday 2.3% fall, on heavy selling across the board after the government cut economic growth forecast for fiscal 2012 and also warned of possible fiscal slippage caused by global uncertainties.
The Indian government in its mid-term review of the economy said on Friday that meeting its fiscal targets would be a challenge in a slowing domestic economy and uncertain global environment as it slashed its economic growth forecast for FY12. In a mid-year economic review presented in parliament, the government said the economy is expected to grow around 7.5%, sharply lower than the original estimate of 9%.
Auto stocks fell on profit taking after recent gains triggered by strong vehicle sales in November. Capital goods stocks extended Thursday's steep losses triggered by reports that the capital goods sector led a decline in industrial output in October 2011. Interest rate sensitive realty stocks fell on profit taking after recent gains triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases next week. Airline stocks tumbled. Interest rate sensitive banking stocks fell on profit taking after recent gains triggered by hopes a slowing economy could prompt the ReserveBank of India (RBI) to pause on rate increases next week.
Among other Asian bourses, the Malaysia KLSE Composite dropped 0.87% to 1,460.13. Singapore Strait Times index fell 1.24% to 2,694.60. Indonesia Jakarta Composite index was down 0.59% to 3,759.61. The South Korea KOSPI declined 1.97% to 1,874.75. The Taiwan TAIEX index dropped 1.28% at 6,893.30. Philippine PSEi fell 0.47% to 4,292.50.
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