HONG KONG (MarketWatch) — Asian stocks markets ended lower Tuesday as signs of an inconclusive general election in Italy sparked worries that another chapter in Europe’s debt crisis could be opening.
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.31% fell 2.3%, while Australia’s S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO +2.13% declined 1%, Taiwan’s Taiex lost 0.8% and South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.05% gave up 0.5%.
Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.01% declined 1.3%, while China’s Shanghai Composite /zigman2/quotes/206600939/delayed CN:000001 +0.32% fell 1.4%, staging a sharp afternoon retreat.
/zigman2/quotes/210598065/realtime DJIA 27,288.18, +140.48, +0.52%
Asia investors took an early lead from the U.S., where stocks ended with heavy losses Monday as the votes were being counted in Italy. Read: U.S. stocks slide as Italy, sequestration hit.
Polls tracking the result indicated that the country could be left with a split result — a situation that could trigger political deadlock, another election, and in a worst case scenario, a renewal of Europe’s debt crisis. Read: ‘Worst-case’ fears rise on Italy election results
“Political uncertainty in Italy has implications for the government’s ability to keep to the fiscal consolidation/reform process — a necessary pre-condition to access [euro-zone fiscal] support mechanisms,” said Barclays Capital strategist Aroop Chatterjee.
The yen rebounded sharply overnight, particularly against the falling euro, as investors rediscovered the Japanese currency’s safe-haven qualities in the face of European uncertainty.
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“The Italian elections have upset the U.S. dollar/yen rally,” said Chatterjee at Barclays. “While we see the reaction as being overdone, and therefore a buying opportunity, we do share the concerns behind the move.”
The dollar /zigman2/quotes/210561789/realtime/sampled USDJPY +0.1344% bought ¥92.15 on Tuesday, recovering from ¥91.83 in late North American trading, but still well below the intraday high of ¥94.76 Monday. The euro, which plunged 4% against the yen Monday, also recovered a little. Read more about the yen moves in Currencies report.
The yen’s gains slapped exporter shares, as Nikon Corp. /zigman2/quotes/203281219/delayed JP:7731 -3.15% /zigman2/quotes/209396469/delayed NINOY +1.33% fell 3.4%, Honda Motor Co. /zigman2/quotes/200490352/delayed JP:7267 -3.29% /zigman2/quotes/207173990/composite HMC +0.62% lost 3.1% and Nissan Motor Co. /zigman2/quotes/208298710/delayed JP:7201 -3.54% /zigman2/quotes/207656007/delayed NSANY +0.85% dropped 2.6%.
Europe-exposed apparel firm Esprit Holdings Ltd. /zigman2/quotes/205943307/delayed HK:330 +1.16% /zigman2/quotes/209270177/delayed ESHDF -53.33% fell 1.4% in Hong Kong, while airline Cathay Pacific Airways Ltd. /zigman2/quotes/203532437/delayed HK:293 -2.51% /zigman2/quotes/208114856/delayed CPCAY -3.20% declined 2.6%.
Hong Kong and mainland China saw losses for resource-sector companies, with Aluminum Corp. of China Ltd. /zigman2/quotes/202960704/delayed HK:2600 -2.34% /zigman2/quotes/208051344/composite ACH -1.78% /zigman2/quotes/210453246/delayed CN:601600 -0.66% down 2.9% in Hong Kong and lower by 3% in Shanghai.
Jiangxi Copper Co /zigman2/quotes/201668148/delayed HK:358 -1.61% /zigman2/quotes/204256025/delayed JIXAY +37.29% /zigman2/quotes/201334192/delayed CN:600362 -1.10% fell 2.6% in Hong Kong as well as Shanghai, while Angang Steel Co. /zigman2/quotes/209338869/delayed HK:347 -2.71% /zigman2/quotes/207174324/delayed CN:000898 -0.37% dropped 2% in Hong Kong and 2.2% in Shenzhen.
The resources sector — which is sensitive to perceptions of economic growth — was also losing out in Sydney Tuesday.
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Insurance firm QBE Insurance Group Ltd. /zigman2/quotes/207050271/delayed AU:QBE +1.61% /zigman2/quotes/201857553/delayed QBEIF -9.59% fell 2.2% after its 2012 profits missed company estimates. Read: QBE to cut costs as U.S. business drags on profit.
In South Korea, exporters were lower, though not by as much as their rivals in Tokyo. Some Korean firms have suffered this year on concerns that a weaker yen could help the competitive position of Japanese competitors.
Shares off lows; Fed in focus
During the Asia morning session, Dennis Lockhart, president of the Atlanta Federal Reserve Bank, said in the U.S. that the Federal Reserve should stick with its current $85-billion-per-month bond-buying program, at least into the second half of the year.
Markets have been worried that the Fed will scale back the bond-buying program after the minutes of the central bank’s last meeting in January showed some debate over the issues. Read: Fed's Lockhart backs QE at least into second half.
Lockhart’s comments came ahead of two days of congressional testimony from Federal Reserve Chairman Ben Bernanke, due to start later in the day.
“Traders haven’t wanted to drop everything, considering Fed Chairman Ben Bernanke testimony to congress tonight. It is widely expected that Bernanke will use the opportunity to hose down talk of an early reduction in the Fed’s asset purchase program,” said Ben Taylor, a sales trader at CMC Markets. Read: Bernanke may push back against hawkish talk.