Asian markets extend losses on US fears

2012-11-09 13:57

Hong Kong - Asian markets fell on Friday, extending their losses from the previous day as fears the United States is headed for another economic crisis sent Wall Street diving again and dealers running.

The yen remained elevated after Barack Obama's re-election as US president stoked concerns of political gridlock in Washington with a "fiscal cliff" approaching that could tip the country back into recession.

But Chinese data showing inflation at a new three-year low provided some hope, giving authorities more room to loosen monetary policy, while industrial output figures also pointed to a pick-up in the economy.

Tokyo fell 0.90% to 8 757.60 points, Sydney fell 0.49% to 4 462.0 points, while Seoul shed 0.52% to 1 904.41 points.

Hong Kong lost 0.85% to 21 384.38 points.

Shanghai ended down 0.12% at 2 069.07 points, although it was well off its earlier lows thanks to the upbeat economic figures indicating China could be emerging from its growth slowdown.

While Obama's victory over Mitt Romney removed uncertainty, traders have now turned their focus to the deep spending cuts and huge tax hikes that will come into force on January 1 if Republicans and Democrats do not reach a deal.

The package is a major threat to the economy after a protracted but possibly reckless compromise was reached last year - with the expectation a less painful plan could be agreed - to raise the country's borrowing cap.

If the automatic measures kick in, the United States' slow recovery from the financial crisis could be reversed and the nation tip back into recession, dealing a blow to the global economy.

The threat of a fiscal crisis sent Wall Street tumbling for a second day Thursday.

The Dow, which suffered its worst one-day drop of the year on Wednesday, lost another 0.94%, the S&P 500 fell 1.22% and the Nasdaq lost 1.42%.

On Friday official data showed Chinese inflation eased in October to 1.7% year-on-year, compared with 1.9% in September. The latest result represents the lowest level since January 2010.

Dealers saw the figures as providing the central bank more leeway to cut interest rates to spur the economy, which is showing signs of breaking out of a recent slumber.

Also Friday China said industrial output rose a better-than-forecast 9.6% year on year in October, while government investment surged 20% in the first 10 months of 2012.