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Asian stocks fall amid dim US economy prospects

Asian stocks fall amid dim US economy prospects

August 3rd, 2011 by KELLY OLSEN, AP Business Writer in News

SEOUL, South Korea (AP) - Asian stocks fell sharply Wednesday as relief the U.S. averted a debt default gave way to increasing pessimism over prospects for the world's biggest economy.

Oil extended losses, trading near $93 a barrel amid expectations slower U.S. economic growth will crimp demand for crude.

Japan's Nikkei 225 index slid 2.1 percent to 9,642.86 and Hong Kong's Hang Seng shed 1.9 percent to 21,995.75.

South Korea's benchmark Kospi index tumbled 2.7 percent to 2,064.35. Stock markets in Australia, Taiwan, India, Singapore, the Philippines and Indonesia also dropped.

There "seems to be a lot of fear in the market, a lot of panic," said Jackson Wong, vice president at Tanrich Securities in Hong Kong, citing worries that the terms of a deal signed by President Barack Obama on Tuesday to avert a U.S. default may worsen an already slowing economy.

China's Shanghai Composite Index, barely bucked the trend, gaining 0.1 percent to 2,681.68.

The declines in Asia followed a sharp drop on Wall Street on Tuesday on a series of weak economic reports and poor earnings from several big companies.

The Dow Jones industrial average fell 265.87 points, or 2.2 percent, to 11,866.62 for its eight straight decline. That's the longest streak since October 2008.

The Standard & Poor's 500 index, meanwhile, lost 32.89 points, or 2.6 percent, to 1,254.05. That was its seventh consecutive drop and the longest since the height of the financial crisis in October 2008.

European stock markets also fell Tuesday, with Germany's DAX falling 2.3 percent.

Hurting investor sentiment were reports showing that U.S. consumers cut spending in June for the first time in nearly two years, while incomes rose by the smallest amount since September. That news followed a weak manufacturing survey the day before.

Pessimism about the economy outweighed relief that the U.S. averted a potentially debilitating debt default after Obama signed a compromise bill Tuesday to raise the country's $14.3 trillion borrowing limit.

The signing, which was the culmination of weeks of often acrimonious debate and political brinkmanship between Democrats and Republicans, came just hours ahead of a midnight deadline to raise the debt ceiling.

In currencies, the dollar rose marginally to 77.25 yen from 77.22 yen late Tuesday in New York amid caution over potential moves by Japanese authorities to purchase the greenback to weaken their currency to support exporters. The euro, meanwhile, rose to $1.4213 from $1.4201.

Benchmark oil for September delivery was down 33 cents to $93.46 a barrel in electronic trading on the New York Mercantile Exchange. Crude lost $1.10 to settle at $93.79 on Tuesday.


Associated Press writer Alex Kennedy in Singapore contributed to this report.