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 Most of Asia's damage was done by 1.5-2 percent falls in Australia,
Korea and Malaysia, and Europe also struggled to maintain what had
looked to have been a brighter start to the day. [.EU]
Car giant Volkswagen slumped more than 15 percent after it was found
to have cheated U.S. emission tests, while insurer RSA dropped 20
percent after rival Zurich abandoned a bid for the firm.
There was, however, some brighter news after an unexpectedly clear
election victory in Greece on Sunday and an upgrade for Portugal's
sovereign rating which helped lift southern euro zone bond markets.
Oil and other commodity markets [MET/L] also rebounded after falls
at the end of last week, although for the most part it was
unconvincing and emerging market currencies continued to strain amid
the global growth worries.
Malaysia's ringgit suffered again after the Wall Street
Journal reported that the U.S. Federal Bureau of Investigation was
now looking into money-laundering at troubled Malaysian state fund
1MDB.
"Generally markets are a bit more positive today although nothing
that suggests confidence in the wake of decisions by the Federal
Reserve not to hike rates last week," said Michael Hewson at CMC
markets in London.
"The economic environment has changed since the Fed last hiked
rates. It is not just the U.S. central bank..., it is wearing the
mantle of the global central bank, and markets are struggling with
that."
Investors should get a good explanation this week as to exactly why
the Fed didn't raise rates with its chair Janet Yellen among a host
of other officials due to speak.
On top of that there will be closely watched economic data from both
China and Europe which should give a clear picture where the global
economy is heading.
DOLLAR HOVERS
China was the sole Asian market to defy the region's downtrend on
Monday, with the Shanghai Composite index up 1.9 percent and the
CSI300 rising 1.75 percent.
Chinese Vice Finance Minister Shi Yaobin said the recent market
volatility in the country was a short-term issue and that it could
maintain a healthy economic growth rate going forward.
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A Reuters poll shows economists expect this week's 'flash' September
China factory PMI reading to edge up to 47.5 from 47.3 in August.
That would keep it near 6/1-2-year lows, however, and mark the
seventh straight monthly contraction in activity.
In the currency market, the U.S. dollar index, which fell after last
Thursday's Fed decision, rose 0.3 percent to 95.365, although the
U.S. currency was slipping fractionally against the yen and euro in
European trading.
The broader rise was helped as U.S. government bond yields began to
tick back up again, having fallen post the Fed meeting.
In Europe, German Bund yields were dragged up in the U.S. slipstream
as France's rating downgrade by Moody's on Friday added to the
pressure on its bonds.
In contrast, Portuguese bond yields fell after Standard & Poor's
lifted its rating, while periphery markets in general got a boost
from Syriza's election win in Greece that reassured investors the
country's bailout will go ahead..
"We will continue negotiations in the coming period, with the debt
issue being the first and most important battle," a senior Syriza
source told Reuters. "We will ask all political forces to support
our efforts."
(Additional reporting By Nichola Saminather in Singapore; Editing by
Mark Heinrich)
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