Investors in Asia reacted cautiously yesterday to the latest plan by the US Federal Reserve to unblock credit markets, with stock markets in the region showing mixed fortunes.
The gloomy outlook for the global economy weighed on sentiment, prompting profit-taking in some markets despite the Fed’s announcement that it would buy as much as US$800 billion in mortgage and asset-backed securities.
“The massive injection plan by the Fed is something that should have been done by the government in the first place,” said Seiichi Suzuki, a strategist at Tokai Tokyo Securities. “This is what investors had expected in the grim situation.”
Tokyo’s Nikkei-225 index ended 1.3 percent lower, weighed down by concerns about a stronger yen, and Sydney slipped 2.3 percent. But Seoul closed up 4.7 percent and Hong Kong’s Hang Seng was 3.4 percent higher by lunch.
Adding to jitters in Tokyo, Fitch Ratings downgraded Toyota Motor Corp by two notches to AA, warning that in the current slump “even the strongest player” no longer deserved its top rating.
In China, hundreds of laid off workers rioted amid a dispute over severance pay, smashing offices of a toy factory and clashing with police, state media said yesterday.
The unrest on Tuesday night in Guangdong Province, the heartland of China’s export-oriented light industry, was the latest in a series of protests that have flared up amid rising unemployment linked to the global economic crisis.
In a wobbly session on Wall Street on Tuesday, the Dow Jones Industrial Average rose 0.43 percent but the tech-heavy NASDAQ fell 0.50 percent.
The Commerce Department reported the US economy shrank at a 0.5 percent pace in the third quarter, in a revised estimate for gross domestic product that many analysts say is the start of a steep downturn.
In Brussels, draft legislation set to be unveiled Wednesday called for a “significant” two-year stimulus campaign to jolt embattled EU economies out of recession.
“Only through a significant stimulus package can Europe counter the expected downward trend in demand, with its negative knock-on effects on investments and employment,” the draft document said.
The draft did not say how much the stimulus package could be worth but commission chief Jose Manuel Barroso has said it should be at least about 130 billion euros (US$170 billion).
France for its part plans to inject 19 billion euros into key industries as part of a stimulus package to kick-start the French economy, Finance Minister Christine Lagarde said.
The dollar edged down against the yen as traders mulled the new push by the Fed to unfreeze credit markets — a move that unsettled some traders.
“It left us wondering if the Fed needs to do this much,” said Kenichi Yumoto, vice president of forex trading at Societe Generale. The dollar eased to ¥94.97 in Tokyo afternoon trade, down from ¥95.24 in New York late on Tuesday. The euro dropped to US$1.2969 from US$1.3063 and to ¥123.66 from ¥124.45.
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