Asian stocks declined Monday as cautious investors evaluated whether the three-moth old rally is due for a pause amid conflicting sings of an economic recovery.European stocks were also down following the losses in Asia.Earlier, Asian benchmarks declined with Japan’s Nikkei 225 stock average losing 1% to 10,039.67 and the Hang Seng Index in Hong Kong declining more than 2%.South Korea’s Kospi was off 1.1%. However, the Shanghai Composite index in Mainland China bucked the trend, rising 1.7%.
U.S. stock futures pointed to a lower open on Wall Street with Dow futures down 94 points, or 1.1%, at 8,696.
Friday saw a quiet trading week coming to a halt, in which the Dow Jones Industrial Average joined the S&P and Nasdaq in positive territory for the year.The Dow, which has risen in 12 of the last 14 weeks, gained 28 points, or 0.3%, to close above its 2008 finish of 8,776.39.The S&P ended the day flat and Nasdaq recorded a modest decline.Decision by ten financial firms to repay US government funds was an indication that the worst of the credit crisis is over.However, spiraling yields on government bonds and rising commodity prices kept sentiments under check. Dollar prices, however, got some boost following positive comments from Russia’s finance minister and commodity-based stocks and oil prices declined.
At the weekend meeting of G8 finance ministers in Italy, Russian finance minister Alexei Kudrin remarked that dollar’s status as the world’s main reserve currency was likely to continue in the near term.The G8 finance ministers signaled that the worst of the financial crisis is over, raising the need for talks on central banks’ upcoming exit strategies. However, they stopped short of painting a rosy picture, saying, “…the situation remains uncertain and significant risks remain to economic and financial stability”. According to US Treasury Secretary Geithner, however, “I don’t think we’re at the place yet where we can say we have a recovery in place”.
Hartford Financial (NYSE:HIG), which has asked for a $3.4 billion US Treasury aid, announced plans to raise $750 million through a stock sale to boost its capital position. 10-year government bond yields pulled back from their recent highs and declined to 3.75% from 3.80%.
Comments from the annual Paris Air Show pointed to an increasingly difficult environment for commercial aircraft manufacturers, with airlines looking at two straight years of losses.Despite a contested election in Iran, profit-taking and positive US dollar statements from Japan and Russia sent commodity-based stocks lower this morning, as oil prices sank to $71 per barrel.
Key talks scheduled this week include Fed Governor Duke today on responses to the financial crisis; Fed Governor Warsh on economic policy Tuesday, Bernanke at the financial literacy summit on Wednesday, and Treasury Secretary Geithner Thursday on financial regulation.
