Asian stocks, dollar hit by global financial woes
( Reuter )- Asian stocks fell to their lowest in almost eight weeks on Monday while the dollar hit a record low against the euro, as the sale of Bear Stearns and the Federal Reserve's cut in its discount rate was seen underscoring the frailty of the global financial
Safe-haven assets rose, with spot gold surging more than 2 percent to a record high above $1,000 an ounce, while Japanese government bond futures jumped to a three-year high and U.S. Treasury futures hit five-year highs.
In an unexpected emergency step before the markets opened in Asia, the U.S. Federal Reserve lowered the discount rate it charges on direct loans to banks and announced a new program to lend directly to other big financial firms.
At the same time, JPMorgan Chase & Co (JPM.N) said it would buy stricken U.S. investment bank Bear Stearns N for just $2 a share, though the lender said the deal-related costs of the purchase would total $6 billion.
"Desperate times need desperate measures. The Federal Reserve is doing what it takes to restore stability and if it means cutting the discount rate on a Sunday night in the U.S., then so be it," said Craig James, chief equities economist at Commesec in Sydney.
The MSCI measure of Asian stocks outside Japan (.MIAPJ0000PUS) dropped 1.5 percent as of 0108 GMT, trading at levels it has not seen since January 23.
Japan's Nikkei average (.N225) dropped 3.2 percent, while South Korean (.KS11) and Australian (.AXJO) stocks fell more than 2 percent each. Shares in Taiwan (.TWII) opened down 2 percent.
Asian stocks, along with markets elsewhere, have been hit hard this year by the subprime- and credit-related writedowns in the global financial sector, and worries about the impact of a U.S. economic slowdown in the export-dependent region.
Meanwhile, local currencies have strengthened in line with the slumping dollar, further denting the export sector's outlook, while surging food and energy prices are threatening to raise inflation across the region.
All these factors were starkly evident on Monday.
Spot gold surged more than 2 percent to as high as a record $1,021.40 in Asian trade, compared with late New York levels on Friday of $996.90/997.70. Prices of bullion were last trading at $1,020.09/1,021.70.
Investors opted for other asset classes perceived to be safer, with Japanese June bond futures jumping as much as 0.63 point to 140.90 2JGBv1, the highest since July 2005, before coming back down to 140.81.
U.S. June T-note futures jumped 16/32 to 119-19/ 32 , hitting the highest since mid-2003. The two-year note jumped 8/32 in price to yield 1.357 percent, tumbling 13 basis points from late U.S. trade on Friday to a five-year low.
But oil edged lower, amid some selling pressure after last week's rally to a record $111 peak, with frontmonth U.S. crude for April delivery down 14 cents at $110.07 a barrel.