Monday, March 5, 2007

Asian Market Shake and Quake

Not one stock market index was/is green in Asia. Tokyo's Nikkei fell over 3%, or 575 points. Hong Kong was down about 3%, while Australia suffered a more than 2% decline. China's Shanghai Composite ended 3.5% lower at 2,733.62.

"TOKYO (Dow Jones)--Tokyo shares Monday took the heaviest beating in eight months, as a sharp surge in the yen smacked Toyota, Sharp and other exporters and prompted speculators to place big bets on a deeper rout.
Flagship exporters like Toyota, Nissan, Yamaha Motor Sharp, and Sony were major casualties of the selling, which knocked the Nikkei 225 Stock Average down 3.3%, or 575.68 points, to 16642.25, the biggest point drop since June 13 last year.

The vicious sell-off left the benchmark index 9.1% off its recent peak of 18300.39 on Feb. 26 and sliced through key support at 16749, the Nikkei's 26-week moving average, putting last November's low around 15600 in traders' sights.

"Everything came at once," said Hitoshi Yamamoto, president of Commerz International Capital Management, referring to the jump in the yen, growing worries about an increase in selling related to the settlement of futures and options contracts and declines in U.S. stocks. "

Further market turmoil came by way of stronger than expected economic data:

  1. Japanese companies allocated 5.2% more for capital investment than in the previous three months in the October-December quarter on a seasonally adjusted basis, marking the first growth expansion in two quarters, according to data released Monday by the Ministry of Finance.
  2. Ministry of Finance data showed Monday that corporate capital investment grew 16.8% on year, its fastest pace of growth since the July-September quarter of 2002, when software spending started to be included in the data. The October-December result also marked the 15th straight quarter of increase, the MOF said.

The firm economic data sparked a further unwinding of the so-called Yen carry-trade, sending the dollar down more than a full cent against the Yen, or Yen futures up nearly 90 points.

Bottom line as I head off to some shut-eye, U.S. stocks will open sharply lower later this morning barring a miraculous event.

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