Asian stocks retreat as fears resurface about Europe debt crisis, China inflation stays high

October 14, 2011 7:11 AM16 commentsViews: 18

Asian stocks retreat as fears resurface about Europe debt crisis, China inflation stays high

HONG KONG – Asian stocks were mostly lower Friday as investors worried about uncertainty over corporate earnings and Europe’s debt crisis while China said inflation eased but stayed high.

European stocks rose amid hopes a meeting of Group of 20 finance ministers and central bankers in Paris would make headway on Europe’s sovereign debt crisis

Japan’s Nikkei 225 index fell 0.8 per cent to close at 8,747.96 and Hong Kong’s Hang Seng slid 1.4 per cent to 18,501.79. The Shanghai Composite Index in mainland China slipped 0.3 per cent to finish at 2,431.37 after authorities said China’s inflation rate eased to 6.1 per cent in September but still well above the official target

Australia’s S&P/ASX 200 dropped 0.9 per cent to end at 4,269.00. Benchmarks in Taiwan and New Zealand also fell while Singapore stocks dipped after government officials lowered the country’s 2011 economic growth forecast and warned growth may slow further next year. South Korea’s Kospi index, however, rose 0.7 per cent to end at 1,835.40.

European stocks advanced in early trading. The FTSE 100 index of leading British companies was down 0.1 per cent at 5,397.48, while Germany’s DAX was up 0.8 per cent to 5,964.03. France’s CAC 40 was 0.9 per cent higher at 3,214.55.

U.S. stocks were poised to rise. Dow futures were up 0.5 per cent at 11,454 while broader Standard & Poor’s 500 futures were up 0.6 per cent at 1,204.80.

“There’s an awful lot of reticence to get involved in the markets, particularly from the institutions, ahead of earnings season,” said Ben Collett, Hong Kong-based head of Japanese equities at Louis Capital Markets.

With markets so volatile recently amid uncertainty over Europe’s debt crisis and company profits, “you need to basically have your foot on the sell button during this earnings season for anything other than better than expected,” Collett said.

Analysts said China’s September inflation data was another sign that price increases are moderating after peaking in July, but they didn’t expect the government to ease back on inflation-fighting measures just yet.

Fears about Europe’s debt crisis were reignited after some ratings agency downgrades on Thursday. Standard & Poor cut Spain’s long-term debt rating, citing the country’s weak growth prospects and risks facing its banks while Fitch downgraded its outlook for three European banks and said it’s reviewing ratings for a host of others, citing ongoing exposure to sovereign-debt in Europe’s weaker economies and sluggish growth prospects.

The euro rose to $1.3803 from $1.3783 in late trading Thursday. The dollar strengthened to 76.94 yen from 76.88 yen.

“Too many policy obstacles still lie ahead” regarding the European debt crisis, strategists at Credit Agricole CIB said in a research note, adding that questions remain unanswered over the size of recapitalization needed for European banks and how much of a loss investors will have take on Greek bonds.

Crude oil for November delivery was up 87 cents to $85.12 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.34 to end at $84.23 on Thursday. Brent crude rose 98 cents to $110.18 a barrel.

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