Asian stock markets mostly lowered Friday as weak economic data from the U.S. and concerns over the euro zone debt crisis weighed on the sentiment.
Japan's benchmark Nikkei plunged 1.43 percent or 125.68 points to 8669.87, Chinese Shanghai declined 0.74 percent or 16.20 points to 2168.64 and Indian benchmark BSE Sensex fell 0.67 percent, while Hong Kong's Hang Seng gained 0.42 percent or 81.75 points to 19640.80 and South Korean KOSPI ended flat.
Market sentiment was subdued during Asian trading hours as investors got hammered by a new dose of negative economic news from the U.S., including a rise in the unemployment claims, a drop in the manufacturing activity and home sales. The existing home sales declined unexpectedly to an eight month low in June and raised fresh doubts about the housing recovery, while the Philly Fed index came in 5 points worse than expected and weekly jobless claims rebounded to 386,000.
Weaker than expected economic reports added concern to the strength of economic recovery in the world’s largest economy and also raised fresh hopes for additional pro-growth measures from the Fed. However, hopes for QE3 and strong corporate earnings pushed the U.S. stocks higher, with S&P 500 reaching to a two and a half month high.
“Given Bernanke’s testimony outlining options for policy easing and more signs reflecting that the US recovery is losing momentum, a series of disappointing data (higher initial jobless claims, soft Philly Fed Index and existing home sales) further fuelled speculations about QE3,” said a note from Credit Agricole.
Meanwhile, concerns over the European debt crisis resurfaced Thursday as Spanish 10-year bond yields breached an unsustainable level of 7 percent again, despite the support package for Spanish banks. Current levels suggest the rates market is highly sceptical about what progress will be made at the Euro finance ministers’ meeting later Friday. Market participants feel that the short-term support measures available to policymakers currently lack the firepower needed to address the crisis and that a full sovereign bailout is inevitable.
We're still waiting for the bank bailout to be finalized, and there's no guarantee that Spain itself won't need a bailout at some stage, Marc Ostwald, a strategist at Monument Securities in London, told Reuters.
Japanese shares plunged Friday, led by declines from power and financial companies’ shares. Chubu Electric Power Co plunged 5.84 percent and Tokyo Electric Power Co declined 1.52 percent while Hokkaido Electric Power Co slumped 5.14 percent.
Among the financials, Dai-ichi Life Insurance Co fell 3.42 percent and Shinsei Bank Ltd. slumped 6.32 percent, while Mitsubishi UFJ Financial Group Inc. declined 3.41 percent after Morgan Stanley reported a 50 percent drop in the second quarter earnings.
Airlines shares plunged in Hong Kong after an overnight rally in oil prices but gains in the energy sector supported the index. China Eastern Airlines Corp declined 1.82 percent and China Southern Airlines fell 0.51 percent, while China Petroleum & Chemical Corp advanced 1.88 percent and CNOOC Ltd. gained 0.89 percent.