Asian stock markets declined Friday as sentiment was dampened after the European Central Bank (ECB) failed to offer any new stimulus measures to resolve the sovereign crisis in the euro zone.
Markets and the euro retreated as ECB President Mario Draghi disappointed investors hoping for immediate action to tackle the euro zone's fiscal woes. Investors had hoped that Draghi would announce some form of new action such as bond buying, following his last week's pledge to do whatever it took to save the euro.
However, he had only more promises and did not offer any immediate action on how to intervene to save the euro. The ECB kept its key lending rate unchanged at 0.75 percent and its benchmark deposit rate at 0 percent and made little change to the assessment of the economic activity and inflation prospects in its introductory statement.
Draghi stated that the ECB might start to purchase bonds in future to reduce Spanish and Italian bond yields, but stopped short of setting any time frame.
"Draghi put pressure on governments to push ahead with fiscal consolidation and structural reforms. He insisted on 'the adherence of governments to their commitments and the fulfillment by the EFSF/ESM of their role' as necessary conditions for the ECB to undertake further non-standard monetary policy measures," said a note from Credit Agricole.
Tokyo shares fell, led by declines from exporter companies' shares, as the yen gained against major counterparts. The Japanese benchmark index Nikkei declined 1.13 percent or 98.07 points to 8,555.11.
Sony Corp. plunged 6.95 percent after lowering its full-year earnings forecast. Sharp Corp tumbled 28.09 percent after announcing that it plans to cut 5,000 workers by the fiscal year end and also said its losses for the full-year would be worse than initially forecast.
"Draghi kept hopes that the ECB will do what it can within the framework of a central bank and that is positive. But concurrently, markets were reminded of the limit to what the central bank can do for Europe's fiscal crisis. There is now risk of repercussions to having an excessive belief that monetary policy or central banks are 'almighty'," Kazuto Uchida, an executive officer at the Bank of Tokyo-Mitsubishi UFJ, told Reuters.
Hong Kong's Hang Seng declined 0.12 percent or 24.02 points to 19666.18 and South Korea's KOSPI Composite declined 1.11 percent or 20.72 points to 1848.68 while India's benchmark BSE Sensex fell 0.40 percent.
The weakness in the financials and airline shares weighed on Hong Kong markets. Agricultural Bank of China Ltd. declined 0.32 percent and Cathay Pacific Airways declined 1.56 percent while Air China Ltd. plunged 2.77 percent.
The Chinese Shanghai Composite surged 1.02 percent or 21.61 points to 2,132.80 after data showed that China's services industry expanded at its fastest rate in nine months in July. China Services Purchasing Managers Index (PMI) rose to 53.1 in July compared to 52.3 in June, according to data released by HSBC Holdings Plc and Markit Economics.