Asian stocks tumbled yesterday, as a fresh round of jitters about the health of major banks eclipsed any optimism ahead of Barack Obama’s inauguration as US president. European markets opened higher following a sell-off the day before.
Positive sentiment from hopes an Obama administration would act aggressively to bolster the faltering US economy faded amid an onslaught of bad news overnight.
Royal Bank of Scotland forecast a £28 billion (US$41.3 billion) loss for last year, the British government announced plans for a second banking bailout, and the European Commission said the euro-zone economy will shrink 1.9 percent this year. US markets were closed on Monday for the Martin Luther King Jr holiday.
Investors were now bracing for a second wave of banking crises, fearing that many ailing banks have grown “too big” for governments to effectively handle, said Francis Lun (藺常念), general manager at Fulbright Securities (富昌證券) in Hong Kong.
“The results by Citigroup, Bank of America and RBS send a wake-up call to the treasury secretaries of the world that nothing really worked,” Lun said, referring to already announced measures to prop up lenders. “Now we’re almost back to square one.”
Japan’s Nikkei 225 stock average lost 2.3 percent to 8,065.79, paring losses in the afternoon after dipping under the key 8,000-level during the morning session.
“RBS was always seen as one of the weaker banks, and investor fears about its health were reconfirmed,” said Hideaki Higashi, equity strategist at SMBC Friend Securities in Tokyo. “This in turn renewed concerns about the banking system.”
Elsewhere, Hong Kong’s Hang Seng index lost 2.9 percent and Australia’s S&P/ASX200 fell 3.1 percent. Benchmarks in South Korea and Singapore also retreated.
As European markets opened, Britain’s FTSE 100 jumped 1.7 percent, Germany’s DAX rose 1.12 percent and France’s CAC-40 was up 1.1 percent.
US stock futures suggested a weaker open on Wall Street. Dow futures were down 38 points, or 0.5 percent, at 8,205 and S&P500 futures fell 3.8, or 0.5 percent, to 844.80.
Chinese shares bucked the trend in Asia on hopes the government would soon release its stimulus plan for the petrochemical sector.
The benchmark Shanghai Composite Index closed up 1.4 percent, buoyed by steel producers and medical issues, which surged after China reported several bird flu death cases recently.