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Published On: Tue, Feb 5th, 2013

Asia contracts due to Eurozone sales data and political unrest

Asian stocks continued to fall shortly after the opening of the markets on Tuesday. The region’s indices had previously been sitting at its best position for just over 18 months but increasing concerns over the current situation in the Eurozone has swayed investor confidence. Analysts had predicted that this downward turn would take place in the relatively near future but weren’t sure what would be its cause. Europe had appeared to be stable for some time, however recent sales data has hit Asian exporters.

Asia’s MSCI Asia Pacific Index was down to 133.26 just before 10 am this morning in Tokyo, however the opening of markets in China and Hong Kong saw that rise to 133.66 at 11 am. Macquarie Group Ltd shortened by 3.5% due to concerns that they won’t meet their initial forecast for the year, and while China Petroleum and Chemical Corp expect to face a harsh day of trading due to a planned fire sale of shares at more than 9% below its current price. Konica Minolta Holdings Inc shed 2.6% on the back of the Eurozone woes, with more than a quarter of its sales coming from continental Europe.

S&P 500 futures advanced by 0.1% after falling by 1.2% during yesterday’s trading. Yesterday’s decline was thought to be fueled by the advances made by Italian and Spanish bonds. Silvio Berlusconi made sensational claims that he could slash the average Italian households tax bill, a move which his opponents have labeled “reckless”. Berlusconi left office in shame in November of 2011 after multiple scandals, however he remains the frontrunner for the upcoming election. Spanish Prime Minister Mariano Rajoy will be asked to step down by his opposition today after allegations of illegal payments. This lead to gains of almost 4.5% on Italian debt bonds, while Spanish 10 year government bonds advanced by just shy of 5.5%.

Elsewhere Iron ore is expected to fall by more than a third before the end of the current year. China has recently stepped up production of the metal which is used for a heavy portion of its exports. After a sensational rise to $170 per tonne in the first 6 months of the current financial year, analysts believe the ore will slump to $110 a tonne due to the decreased Chinese demand for imports.

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About the Author

- Gregory previously worked for a leading financial news publication and is now assistant news editor of financialtrading.com.

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