Business - Asian shares fall after European downgrades

Jan 16, 2012

Asian markets fell and the euro remained under pressure on Monday after Standard & Poor's cut the rating of nine European nations, including France and Austria's triple-A status.

 

The news brought the eurozone debt crisis back to the forefront with traders looking ahead to a crucial week in the region as Greece struggles to come to an agreement with creditors over its repayments, raising fears it could default.

 

Sydney lost 1.16 percent, or 49.9 points, to finish at 4,145.9, Tokyo fell 1.43 percent, or 121.66 points, to 8,378.36, while Seoul ended 0.88 percent lower, or 16.41 points, at 1,859.27.

 

Hong Kong was 1.09 percent lower in afternoon trade while Chinese shares were off 0.60 percent

 

Taipei lost 1.09 percent, or 77.92 points, at 7,103.62 despite Beijing-friendly President Ma Ying-jeou being handed a second term in weekend elections, a result that came as a relief to the United States and China.

 

S&P on Friday cut France's and Austria's top AAA rating by one notch to AA+ with a negative outlook, citing European leaders' inability to come up with a solid plan to tackle the two-year-old crisis.

 

It also downgraded under-pressure Italy and Spain, which have already seen the interest on their bonds hit dangerously high levels.

 

Overall nine countries had their ratings cut while seven had theirs affirmed. Greece was excluded.

 

The agency warned last month before a European summit aimed at hammering out a solution that it was putting the eurozone on review for downgrade, adding that it would take the outcome of the talks into mind.

"The downgrades were widely anticipated and already priced (in)," Ric Spooner, chief market analyst at CMC Markets, said in a note.

 

"However, they set a nervous early tone for this week's markets as we approach more significant hurdles in the evolution of the eurozone crisis," he added, according to Dow Jones Newswires.

 

Eyes will now be on Greece this week as it holds talks with private banks over writing down part of its debt, which is considered vital to avoid a messy default.

 

Prime Minister Lucas Papademos said his country faced "acute economic dangers" without the writedown deal, which would wipe off 100 billion euros ($127 billion) from Greece's massive debt burden and help unlock further international bailout aid.

 

However, talks at the weekend stalled, raising the prospect that Greece could plunge out of the eurozone with dire results for the region and the global economy.

 

The euro plummeted more than two US cents on Friday after the S&P announcement, hitting $1.2624 in New York late Friday, its lowest since August 2010.

 

However, the single currency was "here to stay" as a global currency and the eurozone currency bloc would bounce back from its fiscal crisis, Michel Barnier, European Union commissioner for the internal market, said Monday.

 

"Let there be no mistake: this is not a crisis of the euro as a currency," he told delegates to the Asian Financial Forum, a gathering of regional banking and finance chiefs in Hong Kong.

 

"The euro is here to stay. In the last 10 years the euro has proven itself as a true world currency... And despite the difficulties, it remains strong.

 

The single currency recovered slightly in Tokyo afternoon trade on Monday, trading at $1.2646. It rose off its intra-day low against the Japanese unit to trade at 97.12 yen, but remained below 97.20 yen in New York.

 

The dollar was at 76.82 yen, edging down from 76.83 yen.

 

New York's main oil contract, light sweet crude for delivery in February, gained 30 cents to $99.03 per barrel and Brent North Sea crude for February delivery was up 20 cents to $111.01 on its last trading day.

 

Gold was at $1,639.10 an ounce at 0655 GMT, against $1,642.25 late Friday.

 

- AFP/cc

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