SINGAPORE (Dow Jones)–Asian stock markets were lower on Wednesday, dragged by weakness on Wall Street and as Alcoa kicked off the U.S. earnings season on a sour note.
“Weaker-than-expected Alcoa earnings and its negative guidance may raise concerns about earnings of other firms as Alcoa is usually a barometer for other earnings,” said J.J. Part at Taurus Investment & Securities in Seoul.
Japan’s Nikkei 225 was down 2.0%, Australia’s S&P/ASX 200 was 1.5% lower, Hong Kong’s Hang Seng Index was down 2.6% and South Korea’s Kospi Composite was 1.9% lower.
Dow Jones Industrial Average ended down 2.3% ahead of aluminum maker Alcoa’s earnings, while the S&P 500 was 2.4% lower and the Nasdaq Composite fell 2.8%. Dow Jones Industrial Average futures were last down 84 points.
Worries over Alcoa were well founded: after the closing bell it posted a first-quarter operating loss of 59 cents a share, wider than the average analyst estimate, due to what it called a “historic drop” in aluminum prices and industrial demand. Alcoa lost 1.5% in regular trade and was down 3.1% in after hours trade.
Alcoa’s results are likely to make investors question if the start of the earnings season marks the end of what’s been described as a bear market rally, keeping risk aversion high and fueling profit-taking on recent gains.
Chris Blair, Patersons head of retail trading in Sydney, said traders did not want to be long before the Easter long weekend there, particularly as U.S. first quarter earnings season gets underway. “The market’s had a good run, it’s due for a pullback and that’s what’s happening at the moment,” he said. “I’m not saying it’s going to come back a lot, but short-term momentum has turned (negative).”
Blair favored gold stocks, with Newcrest and Lihir up about 2.0% as gold finds support near $880.00 per ounce. Australian financial stocks were doing most of the damage after leading the market higher recently, with NAB down 4.0%.
Profit-taking on blue chips’ recent gains was the theme in the Tokyo stock market with Sony down 3.3% and Honda down 0.7%. Daiwa Securities was down 6.0% after posting a securities valuation loss of Y17.42 billion in the fiscal year ended March 31 due to the stock market’s slump.
Sentiment in the Japanese market was not helped by news the country’s February current account surplus was down 55.6% on year as exports and imports both recorded their biggest drops on record.
Shinko Research Institute economist Norio Miyagawa said the 44.9% drop in imports was worrisome as “declines in imports are expected to get bigger ahead as Japan’s domestic demand – such as capital spending and consumer consumption – is shrinking.”
Korean stocks were lower across the board, except for defensive telecom stocks. Doosan Heavy was down 3.0% and Posco was 1.9% lower, but SK Telecom picked up 0.2% and KT Freetel was 0.6% higher.
In China, the Shanghai Composite Index was down 0.2% while Hong Kong stocks suffered heavy profit-taking with Hong Kong Exchanges & Clearing down 4.0% and Sinopec down 3.2%.
Singapore’s cyclical plays, such as property and offshore & marine shares, were out of favor, dragging the benchmark Straits Times Index 1.6% lower.
“While the worst appears to be over, aided by recent mega economic stimulus packages and the G20’s pledge of more than $1 trillion in aid, the recovery process is still slow; we see some near term correction ahead,” said OCBC’s head of research in Singapore Carmen Lee.
Malaysian shares fell 0.4%, Indonesian shares were down 0.6%, Philippine shares were 0.2% lower and New Zealand’s NZX 50 was down 1.3%.
In foreign exchange markets, the Japanese yen and U.S. dollar were gaining against the euro as risk aversion picked up with stock market losses.
The single currency was at $1.3199 from $1.3271 and at Y132.26 from Y133.40. The dollar was at Y100.20 from Y100.43 late in New York.
Asian currencies were weaker against the greenback as jitters over corporate earnings halted recent equity-related dollar inflows.
Offshore investors were net sellers of KRW76 billion worth of Korean shares and the dollar climbed to KRW1,339.00 from Tuesday’s close of KRW1,322.50.
Japanese government bonds were little changed despite the Nikkei’s drop. The upcoming auction of Y2 trillion in five-year bonds was probably weighing the market, said Mitsubishi UFJ Securities strategist Naomi Hasegawa in Tokyo. Lead June futures were up 0.04 at 137.12, with the 10-year cash bond yield down 0.5 basis point at 1.425%.
LME three-month copper nudged lower at $4,350 a metric ton, down $29 from London levels. “With demand outside of China still moribund, we remain concerned that copper prices may retrace significantly once, or if, that (Chinese) buying activity subsides,” said Standard Bank analyst Leon Westgate.
Spot gold was at $881.60 per ounce, up 60 cents versus its New York close. May Nymex crude oil futures were down 89 cents at $48.26 per barrel. “The financial markets – equities and the U.S. dollar – continued to spur much of the day-to-day price movement in the (crude oil) complex. We still view this market as trapped within about a $47-$50 zone and would suggest trading accordingly,” said Jim Ritterbusch at Ritterbusch and Associates.
by Colin Ng and Philip Vahn