Asian stocks fell on Tuesday as uncertainty grew about US plans for a bank bailout, while the euro fell on a report that Russian banks were seeking a delay on repayment of loans.
European shares were set to fall after Swiss bank UBS posted a huge fourth-quarter loss and as US stock futures fell on concerns about the US bank rescue plan. Dow Jones industrial stock futures shed 0.9% and S&P stock futures lost 1%, a sign that Wall Street may fall later in the day.
Japan’s Nikkei business daily said Russian banks would ask Moscow to renegotiate with European and other foreign banks to postpone repayment on up to $400 billion of loans, sending the euro tumbling against the dollar and yen. A Russian government spokesman later said it was not considering a corporate debt restructuring and was not in talks with foreign banks on the issue.
The euro pared some losses but still remained 1% down at $1.2877 and ¥117.75.
Japan’s Nikkei share average fell 0.29%, shedding early gains as the yen climbed against the euro on the Russian debt restructuring report and as uncertainty grew over the US bank rescue plan. However, Nissan Motor surged 7.3% after it announced drastic steps on Monday to cope with the recession, saying it would cut 20,000 jobs. It joined a growing list of automakers warning of red ink this year.
The MSCI index of Asia-Pacific stocks outside Japan fell 0.9%. Hong Kong’s Hang Seng was up 0.4% after extending gains on Monday to its longest rally in two months, while shares on the Shanghai bourse rose 1.8%. South Korean shares fell 0.3% as the government acknowledged for the first time that it expected Asia’s fourth-largest economy to shrink this year.
Foreign exchange markets remained skittish despite Russian denials that the government and banks were in talks to help companies restructure foreign debt. A banking industry official told Reuters no proposal had been submitted to the government, but said bankers had discussed a restructuring plan for corporate debt at a meeting last week. “As banks in Europe have a close relationship with Russia, the report raised worries about their losses which hurt the euro,” said Yuichiro Nakamura, a dealer at Shinkin Central Bank.
The Australian dollar retreated from three-week highs as worries about global economic stability resurfaced and a dismal business confidence survey reaffirmed the risk of a recession at home. The yield on the benchmark 10-year US Treasury note eased almost 1 basis point to 2.98%. Treasury debt prices fell on Monday, taking benchmark yields to their highest levels in over two months. Japanese government bond futures edged down 0.14 point to 138.42.
Oil prices held below $40 a barrel, pausing after an overnight decline as investors awaited progress on the US economic stimulus package. Gold eased, extending the previous day’s fall of almost 2% to trade at $894.40 an ounce. (Reuters)