Deepening economic gloom and fears about the health of the global finance sector pushed Asian shares to their lowest level this month on Wednesday,prompting investors to move to low-risk assets such as regional bonds.
The euro briefly fell to a new 2- month low against the dollar as the currency continued to reel from rating agencies’ warnings that a deep recession in Eastern Europe will inflict more damage on struggling Western European banks.
US economic data on Tuesday added to the grim mood,showing a severe slump in factory activity appeared to be getting even worse this month,while sentiment among US home builders shows few signs of recovering after the bursting of the housing bubble. “The economic data on the global front continues to get worse,and the Australian economy is slowing very quickly. So I think you need to start factoring in further weakness for equity markets globally,” said Savanth Sebastian,equities economist at broker CommSec in Australia.
The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS fell 1.1 per cent by 0245 GMT,after earlier toughing its lowest level since January 26.
The index is headed for its sixth losing session out of the past seven,bringing its losses so far this year to about 11 per cent.
Still that is a better performance than US markets,where the S&P 500 .SPX and the Dow Jones average .DJI are at near their lowest since November 20,which had marked 11-year lows.
The global declines come despite government actions to stem their deteriorating economies.
US President Barack Obama signed a $787 billion economic stimulus bill into law on Tuesday,and was expected to lay out a strategy later in the day to stem home foreclosures and address the housing crisis — one of the chief causes of the global financial crisis and sharp economic slowdown.
Other sectors such as auto makers are also in big trouble as consumer demand slumps in the face of recession. General Motors Corp and Chrysler LLC requested nearly $22 billion in combined additional US government aid on Tuesday.
Japan’s Nikkei average .N225 fell 1.2 per cent,with indexes in Australia .AXJO and Shanghai .SSEC falling more than 2 per cent each.
Shares in South Korea and Hong Kong .HSI fell more than 1 per cent each,with more modest losses seen elsewhere.