September 21, 2011Asia Falls as Fed Disappoints
Asian share markets fell Thursday as investors were discouraged by the U.S. Federal Reserve's latest efforts to stimulate the U.S. economy, sending cyclical stocks across Sydney to Tokyo sharply lower.
The Federal Reserve on Wednesday announced it will increase its share of longer-term Treasurys by $400 billion by June 2012, in a program dubbed "operation Twist" aimed at lowering long term borrowing costs and lift an ailing economy.
Markets, which had widely expected the program, latched on to the Fed's statement that there are "significant downside risks to the economic outlook," prompting investors to selloff stocks and buy into the safe-haven U.S. dollar.
Asian currencies, such as the Singapore dollar and the Korean won, skidded to multi-month lows against the greenback as traders worried the latest Fed move would not be enough to prevent a fresh recession in the U.S.
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"The overwhelming tone is likely to remain negative especially as Operation Twist is unlikely to change the dynamic of a weak growth trajectory for the U.S. and developed economies over the coming months," said Mitul Kotecha, a strategist at Credit Agricole.
Japan's Nikkei Stock Average fell 1.5%, Australia's S&P/ASX 200 tumbled 2.3%, South Korea's Kospi Composite slid 2.6% and New Zealand's NZX-50 lost 0.2%.
Dow Jones Industrial Average futures were up 13 points in screen trade.
In Sydney, shares of Foster's surged 7.6% to A$5.27 after the Australian brewer dropped its resistance to a takeover by SABMiller Wednesday and agreed to a sweetened deal valued at A$9.9 billion.
The deal values Foster's at A$5.10 per share, 4% above what SABMiller offered when it kicked off its pursuit of the company in June.
Other regional growth-sensitive stocks fell sharply; BHP Billiton was off 3.2% in Sydney, Sony dropped 2.2% in Tokyo and in Seoul Samsung Electronics lost 2.7%.
The U.S dollar surged to multi-month highs against the Singapore dollar and the Korean Won, and remained bid against the euro, as investors sought shelter in the greenback from global growth worries. The absence of fresh quantitative easing measures from the Fed also boosted the dollar.
The dollar was at S$1.2867 against its Singapore counterpart after reaching a nine-month high of S$1.2969 earlier, and at KRW1,175.95 against the Korean won after tapping a one-year high of 1,179.50.
The euro was at $1.3566 against the dollar, from $1.3570 late Wednesday in New York, and at Y104.27 against the yen, from Y103.77. The dollar was at Y76.82, from Y76.43.
The New Zealand dollar fell to US$0.7961 from US$0.8232 late Wednesday, after data showing weak second quarter economic growth added to the post-Fed selloff.
Spot gold was at $1,783.30 per troy ounce, up $2.80 from its New York Wednesday. November Nymex crude oil futures were down $1.08 at $84.84 per barrel on Globex.
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