Asian markets fell and the euro remained under pressure yesterday after Standard & Poor’s cut the rating of nine European nations, including France and Austria’s -“triple-A” status.
The news brought the eurozone debt crisis back to the forefront, with traders looking ahead to a crucial week in the region as Greece struggles to come to an agreement with creditors over its repayments, raising fears it could default.
Sydney lost 1.16 percent, or 49.9 points, to finish at 4,145.9, Tokyo fell 1.43 percent, or 121.66 points, to 8,378.36, while Seoul ended 0.88 percent lower, or 16.41 points, at 1,859.27.
Hong Kong shares closed 1 percent lower, while Chinese shares closed down 1.71 percent and Taipei lost 1.09 percent despite Beijing-friendly President Ma Ying-jeou (馬英九) being handed a second term in Saturday’s elections, a result that came as a relief to the US and China.
European shares slipped in opening deals yesterday, with Paris down 0.69 percent, after Standard & Poor’s cut the rating of nine European nations, including France and Austria’s “triple-A” status.
In early trade, London’s benchmark FTSE 100 index of leading shares dipped 0.25 percent to 5,622.44 points, the Paris CAC 40 shed 0.69 percent to 3,174.33 points and Frankfurt’s DAX 30 lost 0.37 percent to 6,120.40 points.
“The downgrades were widely anticipated and already priced [in],” Ric Spooner, chief market analyst at CMC Markets, said in a note.
“However, they set a nervous early tone for this week’s markets as we approach more significant hurdles in the evolution of the eurozone crisis,” Dow Jones Newswires quoted him as saying.
Eyes will now be on Greece this week as it holds talks with private banks over writing down part of its debt, which is considered vital to avoid a messy default.
Greek Prime Minister Lucas Papademos said his country faced “acute economic dangers” without the writedown deal, which would wipe off 100 billion euros (US$127 billion) from Greece’s massive debt burden and help unlock further international bailout aid.
However, talks over the weekend stalled, raising the prospect that Greece could plunge out of the eurozone with dire results for the region and the global economy.
The euro plummeted more than US$0.02 on Friday after the S&P announcement, hitting US$1.2624 in New York late on Friday, its lowest since August 2010.
However, the single currency was “here to stay” as a global currency and the eurozone currency bloc would bounce back from its fiscal crisis, Michel Barnier, EU commissioner for the internal market, said yesterday.
“Let there be no mistake: This is not a crisis of the euro as a currency,” he told delegates to the Asian Financial Forum, a gathering of regional banking and finance chiefs in Hong Kong. “The euro is here to stay. In the last 10 years, the euro has proven itself as a true world currency ... And despite the difficulties, it remains strong.”
The single currency recovered slightly in Tokyo afternoon trade yesterday, trading at US$1.2646. It rose off its intra-day low against the Japanese unit to trade at ￥97.12, but remained below ￥97.20 in New York.
The US dollar was at ￥76.82, edging down from ￥76.83.
New York’s main oil contract, light sweet crude for delivery next month, gained US$0.30 cents US$99.03 per barrel, while Brent North Sea crude for delivery next month was up US$0.20 to US$111.01 on its last trading day.