Asian markets decline on drop in U.S. shares

L.A. Times Archives

Nov. 12, 2007 12 AM PT

From the Associated Press

Asian markets fell sharply today as traders took their cues from Wall Street, where shares fell Friday amid renewed concerns about U.S. mortgage problems.

Hong Kong’s benchmark index dropped as much as 4.3%, while Japan’s main index lost as much as 3.4% and South Korea’s Kospi fell as much as 4.2%.

Japan’s benchmark Nikkei 225 index was at 15,094.78 points, down 488.64 points, or 3.14%, shortly after the afternoon session resumed on the Tokyo Stock Exchange.

The Nikkei has dipped below 15,000, hitting its lowest level for the year.

The sharp drop is “mainly due to Friday’s plunge on the U.S. market and the stronger yen,” said Shoji Yoshigoe, general manager at Mitsubishi UFJ Securities.

Japanese exporter issues were among the early decliners due to a strengthening yen, which is at its highest levels against the dollar since May 2006.

Electronics maker Sharp Corp. was down 3.8% and steel maker Nippon Steel was off 5.6% at the end of the morning session.

“I’m afraid factors from overseas, such as sub-prime problems, are coming over to Japan. We’ll closely monitor the situation,” Chief Cabinet Secretary Nobutaka Machimura said.

Meanwhile, in New York, the stock market this week is hoping for signs that the economy is surviving the problems in the financial sector -- and that the Federal Reserve will come to the rescue if it’s not.

Investors are slowly getting a clearer picture of how much in risky and deteriorating debt securities the world’s major financial institutions are holding, and they don’t like what they see.

Wall Street already expects banks’ portfolios to lose at least $20 billion in the fourth quarter, after announcements of anticipated write-downs of mortgage-backed securities and other debt instruments by such financial institutions as Citigroup Inc., Morgan Stanley and Wachovia Corp.

Investors have been bracing for fourth-quarter write-downs for a while, but the amount was larger than many were prepared to hear. As a result, volatility has returned to virtually all corners of Wall Street.

After huge swings in either direction, the Dow Jones industrial average finished last week down 4.1% and the Standard & Poor’s ended down 3.7%.

The Nasdaq composite index was hit the hardest last week, as investors’ optimism vanished about the technology sector being isolated from the slowing economy and problems in the financial markets. Nasdaq ended the week down 6.5%.

Meanwhile, gold lifted further above $800 an ounce to its highest levels since 1980, and crude oil briefly breached $98 a barrel as the dollar plunged.

The combination of shaky financial markets and inflationary triggers has worried investors that the Fed’s hands are tied. An interest rate cut could send the dollar down even further, but keeping rates where they are might translate to even wider losses for the world’s major financial institutions.

On Oct. 31, the Fed lowered its key interest rate by a quarter of a percentage point to 4.5%, as expected, after reducing rates by a half-point in September. But the central bank suggested that it might stop cutting rates at its Dec. 11 meeting.

Mild readings on producer prices and consumer prices -- which will be reported on Wednesday and Thursday, respectively -- could help calm the market. As of Friday, economists surveyed by Thomson/IFR predicted, on average, that both the core producer price index and the core consumer price index will have risen by 0.2%.

Wall Street will also want to see strong October retail sales detailed in the Commerce Department’s Wednesday report, and solid readings on October industrial production and capacity utilization on Friday.

The bond market is closed today to observe Veterans Day but the stock market is open.

At a glance

Today

Veterans Day observed. U.S. government bond market and related commodities markets are closed, but all other markets, including the stock market, are open.

Quarterly earnings reports due from Blackstone Group, EchoStar Communications and Tyson Foods.

Tuesday

Treasury reports on federal budget for October.

Treasury bill auction.

Quarterly earnings reports due from Home Depot, TJX and Wal-Mart Stores.

Wednesday

Commerce Department reports on retail sales for October and on business inventories for September.

Labor Department reports on producer price index for October.

Quarterly earnings report due from Macy’s.

Thursday

Labor Department reports on consumer price index for October and on weekly jobless claims.

Freddie Mac reports on mortgage rates.