Thursday, September 29, 2011

GLOBAL MARKETS-Commodities slide, stocks fall on euro crisis fears

SINGAPORE: Asian shares and commodities fell on Thursday on growing worries that Europe's intractable debt problems will plunge the world economy into a second global financial crisis.

Copper fell below $7,000 a tonne, gold slipped below $1,600 an ounce to stand more than $300 below its record high earlier this month, and commodities-related stocks were dumped.

The past week has seen a broad selloff of commodities, equities and emerging markets bonds and a rally in the dollar that has been reminiscent of the rout surrounding the collapse of Lehman Brothers investment bank three years ago.

"Due to the high degree of uncertainty about the European situation and its effects on economic growth, there were anxious market moves in the U.S., and we will see similar moves today," said Yutaka Miura, senior technical analyst at Mizuho Securities.

Tokyo's Nikkei share average fell 0.9 percent, while MSCI's broadest index of Asia Pacific shares outside Japan dropped 1 percent, with its materials sub-index shedding more than 2 percent.

S&P 500 index futures were mildly negative, after Wall Street's broad benchmark dropped 2.1 percent on Wednesday.

The latest source of nervousness was a vote in Germany's parliament at 0900 GMT on Thursday to approve new powers for the euro zone's 440 billion euro ($598 billion) rescue fund.

Whilst opposition votes will ensure the bill passes, a big rebellion within Chancellor Angela Merkel's own centre-right coalition could weaken her politically and cloud future policy making at a time when financial markets and other nations are urging euro zone leaders to act boldly and decisively.

The euro was little changed around $1.3540, while the dollar rose 0.3 percent against a basket of currencies.

"You would suspect weakness until Germany votes, given that it is the big guy that has to fund it," said Gavin Stacey, head of Australia and New Zealand research at Barclays Capital.

"The euro is most likely to continue its trend deterioration until it gets really bad, forcing a resolution to come."

As the commodities rout continued, gold fell 0.7 percent to around $1,596 an ounce and copper , which is highly sensitive to expectations for global growth, fell 4.9 percent to $6,898 a tonne.

U.S. crude oil futures fell 1.3 percent to $80.17 a barrel and Brent crude lost 0.8 percent to $103. ' Reuters


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