Forexpros – Asian stock markets came under heavy selling pressure on Wednesday, as growing fears over a possible Greece exit from the euro zone prompted investors to shun riskier assets ahead of a summit of European leaders later in the day.
During late Asian trade, Hong Kong’s Hang Seng Index tumbled 1.55%, Australia’s ASX/200 Index dropped 1.3%, while Japan’s Nikkei 225 Index climbed 1.1%.
Market sentiment was rattled after former Greek Prime Minister Lucas Papademos said that Greece had no choice but to stick with a painful austerity program or face a damaging exit from the euro zone.
Papademos also warned that preparations for a Greek exit were being considered.
Meanwhile, investors eyed a meeting of European leaders later in the day, amid concerns over a divide between France’s new President Francois Hollande, who favors measures designed to support growth and pro-austerity Germany.
Shares in Hong Kong were broadly lower, weighed down by exporters with high exposure to Europe. Esprit Holdings saw shares drop 2.2%, Li & Fung shares sank 3.4% and Cosco Pacific lost 3.7%.
Financial sector stocks and property developers also contributed to losses, with Sino Land shares falling 4%, Hang Lung Properties slumping 3.2%, while Industrial and Commercial Bank of China shares fell 2.15% and China Construction Bank shares retreated 2.3%. Index heavyweight HSBC Holdings declined 1%.
Meanwhile, in Japan, the Nikkei sold off as investors had their first chance to react to Fitch’s downgrade of Japan’s credit rating on Tuesday to A+ with a negative outlook, citing rising public debt levels.
Further adding to the negative sentiment, the Bank of Japan unanimously decided to keep its benchmark interest rate unchanged and made no changes to its asset-purchase program, it announced earlier.
The decision propped up the yen, which weighed on big name Japanese exporters. Shares of Sony dropped 2.1%, Canon lost 2.55%, while automakers Nissan and Honda slumped 1.3% and 1.35% respectively.
The Nikkei is down more than 15% since hitting a one-year high on March 27, after rallying more than 19% in the first three months of the year, as China’s economic growth slowed and on renewed concern about Europe’s debt crisis.
Elsewhere, shares in Australia were lower, weighed down by heavy losses in Myer Holdings, the nation’s largest department store operator.
Myer shares plunged 7.8% after reporting a slip in quarterly sales and cut its full-year profit estimate, citing a sharp downturn in sales in the past six weeks.
Mining giants BHP Billiton and Rio Tinto also contributed to losses, falling 1.3% and 0.9% respectively.
Looking ahead, the outlook for European stock markets was sharply lower, as investors looked ahead to a European Union summit later in the day amid concerns over a political impasse in Greece and fears over the financial and economic outlook.
The EURO STOXX 50 futures pointed to a loss of 1.35%, France’s CAC 40 futures dropped 1.25%, London’s FTSE 100 futures slumped 1%, while Germany’s DAX futures pointed to a loss of 1.15% at the open.
Later in the day, the euro zone was to release official data on industrial new orders, while the U.S. was to publish a report on new home sales.
Forexpros
