Asian markets hit by US fears

Hong Kong: Asian markets were mostly lower on Thursday after Barack Obama challenged Republicans to accept tax hikes for the rich as part of any deal to averting a fiscal cliff.

Japan’s Nikkei surged thanks to a weakening yen after the leader of the country’s opposition vowed unlimited monetary easing to kickstart the economy if, as expected, he wins a general election slated for next month.

A close eye was also being kept on Beijing, where China unveiled its leaders for the next 10 years, with investors hoping for some clarity on future policy in the world’s number two economy.

Sydney shed 0.89 per cent, or 39.2 points, to 4,349.2, and Seoul slumped 1.23 per cent, or 23.32 points, to 1,870.72.

But Tokyo climbed 1.90 per cent, or 164.99 points, to 8,829.72.

Hong Kong fell 1.55 per cent, or 333.06 points, to 21,108.93 and Shanghai lost 1.22 per cent, or 25.13 points, at 2,030.29, as investors bet the new-look Chinese leadership unveiled earlier in the day was unlikely to embark on any economy-boosting measures any time soon.

Obama, in his first news conference since re-election,on Wednesday laid out his terms for a deal on avoiding the fiscal cliff of tax hikes and spending cuts that are due on January 1 and could tip the US back into recession.

He said he wanted to extend tax cuts for 98 per cent of Americans but insisted any agreement could not include breaks for the wealthiest two per cent, a position most Republicans have rejected.

Wall Street reacted negatively on fears the president’s position could spell out a long, bloody battle between the bitterly divided Republicans and Democrats that could end with no compromise.

The Dow tumbled 1.45 per cent to its lowest close since June 26, while the S&P 500 lost 1.39 per cent and the Nasdaq fell 1.29 per cent.

However dealers welcomed confirmation by the ruling party of Japanese Prime Minister Yoshihiko Noda of a national poll on December 16, bringing an end to months of speculation.

The election is expected to be won by the Liberal Democratic Party, whose leader Shinzo Abe - a former prime minister - Thursday said he would seek more control of the central bank and push for unlimited monetary easing to spur the economy and lift inflation to 2-3 per cent.

“Only by implementing unlimited easing to achieve this target will the market show reaction,” Abe said.

An equity trading director at a foreign brokerage told Dow Jones Newswires: “A potential LDP return to power may bode well for a slew of industries, including nuclear power, consumer finance, and others in light of business-friendly comments already made regarding taxes and regulations.”

On forex markets the dollar and euro added to gains made in New York on Wednesday.

In the afternoon the euro was at 102.94 yen and the dollar bought 80.78 yen, compared with 102.19 yen and 80.23 yen in New York. They are both well up from 101.11 yen and 79.50 yen earlier Wednesday in Asia.

The European single currency traded at $1.2743 Thursday, compared with $1.2734 late in New York.

In China there were few surprises as Xi Jinping was unveiled as the new head of the Communist Party and the seven-member Politburo Standing Committee, the top decision-making body.

“The major good thing about (the change in leadership) is that it takes away at least one of the major uncertainties about China,” said David Chang, regional head (Greater China) at Franklin Templeton Investments in Hong Kong.

Investors are now hoping for some clarity on future policy for the world’s number two economy.

But BOC International analyst Shen Jun told AFP: “It’s unlikely the new leaders will introduce fresh macroeconomic policies and market-moving measures in the short term.”

Eurozone fears remain in place as anti-austerity strikes kicked off around the continent, hitting Spain, Portugal, Italy and Greece.

Adding to worries was another steep fall in gross domestic product for Athens and Lisbon, while dealers nervously await data for Germany, Spain, Italy, France and the Eurozone later in the day.

On Tokyo’s Nikkei Sony slumped more than almost nine per cent to more than 30-year lows on the Nikkei after it said it would issue bonds worth 150 billion yen to raise cash for investment and repay debts, fuelling fears of stock dilution.

Oil was slightly higher. New York’s main contract, light sweet crude for delivery in December gained eight cents to $86.40 a barrel in the afternoon and Brent North Sea crude for December delivery fell 81 cents to $108.80.

Gold was at $1,724.70 by 0810 GMT compared with $1,725.78 late Wednesday.