Asian markets fall as Japan's recession deepens

[February 16, 2009]  HONG KONG (AP) -- Most Asian stock markets fell Monday, as new figures showed Japan's economy contracted at its quickest pace in 35 years and Group of Seven finance ministers warned the global slump will drag on through most of the year. European shares opened lower.

Japan's worse-than-expected fourth quarter GDP numbers were a sobering reminder of the toll on Asia's export-driven economies as world demand collapses amid the worst slump in decades. The world's second-biggest economy shrank 3.3 percent from the previous quarter, or at an annual pace of 12.7 percent.

Investors also seemed disappointed after finance chiefs from the Group of Seven developed countries finished their meeting in Rome with pledges to work together to boost growth and unemployment, but stopped short of concrete measures.

Increasingly, investors are unconvinced governments around the world are acting quick enough to solve the credit crisis, plummeting consumer demand and other problems at the heart of the economic slowdown, analysts said.

"The global recession is deeper than anticipated. At the same time policy makers are failing to deliver measures to address the problems," said Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong. "It seems that what they're doing is too little too late."

Japan's Nikkei 225 stock average edged down 29.23 points, or 0.4 percent, to 7,750.17, and Hong Kong's Hang Seng Index dropped 98.79 points, or 0.7 percent, to 13,455.88. South Korea's Kospi lost 1.4 percent to 1,176.23.

India's benchmark tumbled 3.6 percent after the government, proposing its interim budget, offered no new stimulus measures. Markets in Australia and Singapore also retreated.

Bucking the lower trade, Shanghai's benchmark climbed 3 percent to 5 1/2-month high to extend China's recent really.

As trading started in Europe, Britain's FTSE 100 was down 0.1 percent, while benchmarks in Germany and France shed 0.4 percent.

In Japan, several exporters were hurt by the data showing the economy sank deeper into recession.

The result represents the steepest drop for Japan since the oil shock of 1974 and outpaced annual pace declines of 3.8 percent in the U.S. and 1.1 percent in the euro zone. A survey of economists by Kyodo news agency had projected an 11.6 percent contraction.

"It's clearly very shocking data," said Clive McDonnell, head of Asia strategy at BNP Paribas Securities in Hong Kong. "The drop is certainly beyond our own quite negative expectations. (Japan's) policy response has not been as effective."

Shares in Toyota Motor Corp. lost 0.7 percent, while electronics heavyweight Canon Inc. slid 1.2 percent. Sony Corp. lost 1.3 percent.

Meanwhile, mainland China's gains spread across an array of industries, with some resource firms especially strong. Baoshan Iron & Steel Ltd., the country's biggest steelmaker, soared the daily limit of 10 percent.

Since the start of the year, Shanghai's index has surged more than 31 percent. But analysts say the rise has been driven not by economic fundamentals but by a surge in bank lending that has sent money flowing into the market.

"The economic fundamentals are not strong enough to support the market's rise," said Zhang Xiang, an analyst for Guodu Securities in Beijing. "The market is in an irrational state, which is not going to last long."

Weighing on most Asian markets were declines on Wall Street last week.

Friday, the Dow fell 82.35, or 1.04 percent, to 7,850.41, its lowest close since Nov. 20. Broader stock indicators also fell, with the Standard & Poor's 500 index down 8.35, or 1.00 percent, to 826.84. The S&P 500 ended the week off 4.8 percent.

U.S. equity markets are closed Monday for Presidents Day. Wall Street futures sank in Monday trade, with Dow futures down 0.2 percent and S&P futures losing almost 0.3 percent.

In the coming days, investors will be watching President Barack Obama, expected to sign the country's $787 billion economic stimulus measure on Tuesday. He plans to outline steps to stem home foreclosures on Wednesday, though analysts say investor enthusiasm surrounding the pending announcement is fairly low.

In currencies, the dollar weakened to 91.85 yen, down from 91.87 yen late Friday. The euro fell to $1.2756 compared to $1.2860.

Oil prices were steady after soaring 10 percent last week, trading 5 cents higher at $37.56 for a barrel of light, sweet crude for March delivery. The contract rose $3.53 to settle at $37.51 a barrel on the New York Mercantile Exchange on Friday.

[Associated Press; By JEREMIAH MARQUEZ]

AP reporter Tomoko A. Hosaka in Tokyo and researcher Bonnie Cao in Beijing contributed to this report.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.