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By Rafael Nam
HONG KONG, Jan 15 (Reuters) - Bleak economic data globally
and a deepening banking crisis in the United States knocked
Asian shares to a five-week low on Thursday, while safe-haven
government bonds benefited from renewed market jitters.
Shares in Bank of America Corp <BAC.N> and Citigroup Inc
<C.N>, two of America's largest banks, sank on Wednesday and
investors questioned whether the firms have enough capital to
cover losses from toxic assets and a weak global economy.
Falls were severe in some Asian stock markets: key indexes
in Japan <>, South Korea <>, Australia <> and
Taiwan <> dropped more than 3 percent each. Japanese
government bond futures rose to their highest in four months.
The increase in risk aversion comes despite efforts by
policy makers to counter the downturn by cutting interest rates
and increasing spending.
The European Central Bank meets later in the day and is
expected to slash interest rates. But there is considerable
uncertainty about how deep a cut to expect and this helped send
the euro to multi-week lows on Wednesday.
"The problems are global and there isn't any real good news
around," said Martin Angel, a dealer at Patersons Securities
Ltd. in Australia. "You are just not going to escape it," he
added.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 2.4 percent, having hit its lowest in just
over five weeks.
That brings the index down about 6 percent for the year,
though it still remains about 20 percent above a five-year low
struck in November.
Data on Wednesday showed U.S. retail sales dropped a steep
2.7 percent in December, a bad signal for global exporters that
have come to rely on the spending by U.S. consumers.
Indicators in the region also show signs of trouble, with a
report on Thursday showing core Japanese private-sector
machinery orders fell a record 16.2 percent in November
[]
Economic growth in the region is under threat. A South
Korean finance ministry official on Thursday said growth could
fall below the central bank's forecast of 2 percent.
Private-sector researchers are forecasting a contraction.
[]
The yen dipped against the euro and dollar though the
retreat was cushioned by investor risk aversion. The yen tends
to gain in volatile times as investors unwind trades in which
they borrow the low-yielding Japanese currencies to invest in
riskier assets.
The dollar inched up 0.1 percent to 89.16 yen <JPY=> from
late U.S. trade on Wednesday.
BANK WOES
On top of the economic concerns, woes at global financial
firms look set to continue into the new year.
Citigroup <C.N> shares tumbled on Wednesday on worries
about its plan to shrink by about one-third, while HSBC
<HSBA.L> <0005.HK> hit a seven-year low as analysts said it may
halve its dividend and raise up to $30 billion in a rights
issue.
Bank of America Corp <BAC.N> is close to receiving billions
of dollars of support from the U.S. government as it tries to
digest Merrill Lynch, the investment bank and brokerage it
bought on Jan. 1.[]
Investors are also having to contend with potential credit
ratings actions for countries seeing deteriorating finances.
Standard & Poor's cut its rating on Greece's sovereign
rating on Wednesday citing the rising public deficit and
deteriorating economic outlook, helping send the euro to
one-month lows against the dollar and a six-week trough versus
the yen.
The euro had recovered some ground as Asia trade started,
rising 0.1 percent to 117.55 yen <EURJPY=R> and holding steady
around $1.3190 <EUR=>.
The ECB meets later in the day with expectations varying
from a quarter-point reduction of the current 2.5 percent
benchmark rates to a half-point move or more. Some economists
expect no move at all. []
General uncertainty in financial markets was reflected in a
rally in government bonds.
March 10-year Japanese government bond futures rose to
140.19 <2JGBv1>, the highest for a lead JGB futures contract
since mid-September. After trimming some gains, the March
contract stood at 140.07, up 0.42 point on the day.
A rise to above 140.35 would take futures to a nine-month
high, their highest since last April.
The benchmark 10-year JGB yield fell 4 basis points to 1.22
percent <JP10YTN=JBTC>, edging back towards a five-year low of
about 1.16 percent hit in December.
