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Asia stocks tumble amid fears of U.S. government shutdown

Published 09/30/2013, 02:47 AM
USD/JPY
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Investing.com - Asian stock markets kicked off the week with heavy losses on Monday, as growing worries over a looming U.S. government shutdown weighed on appetite for riskier assets.

During late Asian trade, Hong Kong's Hang Seng Index declined 1.3%, Australia’s ASX/200 Index ended down 1.66%, while Japan’s Nikkei 225 Index closed 2.06% lower.

Market sentiment was hit by concerns that political wrangling in Washington could lead to a government shutdown and create a drag on fourth quarter economic growth.

Congress must pass a short-term budget by midnight on Monday in order to avoid a government shutdown.

Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare.

Later this month, Congress will have to extend the U.S. debt ceiling which the U.S. Treasury Department has estimated will be reached by October 17.

In Tokyo, the Nikkei declined sharply as the yen strengthened against the U.S. dollar, weighing on sentiment.

USD/JPY fell to hit a session low of 97.55, the weakest level since August 29. A stronger yen reduces the value of overseas income at Japanese companies when repatriated, dampening the outlook for export earnings.

Automakers Toyota and Honda saw shares drop 2.65% and 2.75% respectively, while Canon and Sharp fell 1.25% and 1.4%.

Japanese megabanks were also lower with shares of the nation’s largest lender Mitsubishi UFJ Financial Group shedding 2.65%, while Mizuho Financial Group and Nomura Holdings declined 4.05% and 2.8% respectively.

Index heavyweights Fast Retailing and Softbank saw shares drop 2.4% and 1.45% respectively.

Meanwhile, in Hong Kong, the Hang Seng fell to a two-week low after data showed that China’s final HSBC Purchasing Managers Index declined unexpectedly to 50.2 in September, down from a preliminary reading of 51.2.

Raw material producers retreated on the back of falling commodity prices. Oil majors PetroChina and CNOOC lost 1.9% and 1% respectively, while Jiangxi Copper Company dropped 1.6%.

The China banking sector also contributed to losses, with China Construction Bank shares falling 1.7%, Industrial and Commercial Bank of China slumping 2.2% and China Minsheng Bank down 2%.

Elsewhere, in Australia, the ASX/200 Index fell to the lowest level since September 13 as miners declined amid concerns over China’s economic recovery.

Australian commodity producers are heavily reliant on Chinese demand for raw materials.

Mining heavyweights BHP Billiton and Rio Tinto fell 1.7% and 2.45% respectively, while Fortescue Metals Group lost 3.85%.

The big four banks were lower as investors looked ahead to Tuesday’s interest rate decision by the Reserve Bank of Australia.

National Australia Bank shares dropped 2.25%, while ANZ Banking Group and Westpac Banking Group slumped 2.35% and 1.7%. Commonwealth Banking Group fell 2.7%.

Looking ahead, European stock market futures pointed to a sharply lower open, as fresh political instability in Italy weighed, while the risk of a looming U.S. government shutdown also hurt market sentiment.

The EURO STOXX 50 futures pointed to a loss of 1.1% at the open, France’s CAC 40 futures shed 1%, London’s FTSE 100 futures indicated a decline of 1%, while Germany's DAX futures pointed to a loss of 0.1% at the open.

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