HONG KONG (Thomson Financial) - (Adding closing levels throughout)
Stock markets across Asia closed lower Monday, with benchmarks in Japan,
Australia and Hong Kong sliding into negative territory as nervousness built
ahead of the release of quarterly results of top U.S. investment banks.
Worries about rising oil prices and doubts over the effectiveness of U.S.
government measures to shore up mortgage giants Fannie Mae and Freddie Mac added
to the downdraft.
Wells Fargo & Co. on Wednesday and JPMorgan Chase & Co. on Thursday are
expected to report profit declines. Citigroup Inc. -- the nation's largest bank
by assets -- is expected to post its third straight quarterly loss.
"We are seeing weakness following concerns in the U.S. about the financial
sector," said Elvina Simpson, an equities analyst at CommSec in Sydney.
Australia's S&P/ASX 200 slipped 1.2 percent to 4,921 and the All Ordinaries
was down 1.2 percent at 5,5007.9.
In Tokyo, the Nikkei 225 index lost 0.2 percent to 13,010.16 and the Topix
was down 0.4 percent at 1,280.72.
The Kospi was up 0.6 percent at 1,558.62.
The U.S. Federal Reserve and the Treasury announced steps Sunday to shore up
mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses
from their mortgage holdings threatened their financial survival.
The Fed said it granted the Federal Reserve Bank of New York authority to
lend to the two companies "should such lending prove necessary" at the same rate
given to commercial banks. Treasury is also seeking expedited authority from
Congress to expand its current line of credit to the two companies should they
need to tap it and to make an equity investment in the companies -- if needed.
"The fractious market mirrored a mixed assessment by investors about the
steps as they appeared to find it difficult to judge whether they will be
efficient in rescuing troubled U.S. financiers," said Soichiro Monji, chief
strategist at Daiwa SB Investments.
The plight of Fannie Mae and Freddie Mac is the market's focus because they
are holding or guaranteeing about $5 trillion worth of mortgages, or about half
the outstanding mortgages in the United States.
"The market will likely be trading softer until the release of quarterly
earnings from U.S. banks this week," Monji said. "With most of the bad news
expected to come out this week, the market may soon see a near-term bottom."
The Hang Seng index gave back early gains, to close 0.8 percent lower at
22,014.46 as investor anxiety set in ahead of the key economic data from the
mainland and earnings announcements by U.S. investment banks.
China is scheduled to announce June CPI and other economic data Thursday.
Analysts are expecting China's inflation to have slowed to a five-month low of
7.1 percent in June.
"Huge losses from U.S. investment banks will of course impact on sentiment
and will make trading volatile this week. Worries about monetary tightening in
China will resurface as its CPI is released," said Matthew Kwok, research head
at Tanrich Securities.
"China is unlikely to relax monetary tightening until maybe the end of the
year," said Kwok.
The Shanghai composite index was up 0.8 percent at 2,878.26.
Elsewhere in Asia, the Philippine Composite index was up 0.8 percent at
2,457.27. The Singapore Straits index was down 0.8 percent at 2,904.12. The
Jakarta composite index slipped 0.8 percent at 2,259.54.
Malaysia's Kuala Lumpur Composite Index (KLCI) lost 0.6 percent to 1,144.0
and India's Sensex provisionally ended 0.75 percent down at 13,368.80. Taiwan's
weighted index closed down 1.21 percent at 7,156.96.
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