Asian stocks mostly lower on eurozone debt fears

HONG KONG - Concerns over Europe's debt crisis returned to the forefront on Thursday, leaving Asian markets mostly lower while the euro continued to be pressured by the dollar and yen.

Despite an upbeat set of economic data from the United States and Europe, dealers turned their attention to indebted Greece and Spain while banks deposited a record amount of cash with the European Central Bank, raising credit crunch fears.

Sydney finished 1.08 percent lower, or 45.1 points, to 4,142.70, Tokyo fell 0.83 percent, or 71.40 points, to end at 8,488.71, while Seoul lost 0.13 percent, or 2.48 points, to close at 1,863.74.

Hong Kong ended 0.46 percent, or 86.10 points, up at 18,813.41 while Shanghai ended down 0.97 percent, or 20.94 points, at 2,148.45.

Taipei added 0.68 percent, or 47.89 points, to 7,130.86.

In Greece, Prime Minister Lucas Papademos said the nation faced an "uncontrolled default" in March unless unions and employers can quickly agree on labour cost cuts.

At a round of meetings he said the labour issue would be key to an EU-IMF evaluation of Greece's economy later this month and determine the conclusion of a second bailout agreement for the country.

"Without the agreement and the funding linked to it, Greece faces an immediate danger of uncontrolled default in March," he warned.

There are fears that an uncontrolled default could infect other weak eurozone member states and threaten the whole euro project.

Dealers were also given a knock by news that the regional government of Valencia was late in repaying a 123 million euro debt to Deutsche Bank, leading to speculation Spain could be forced into a bailout.

Also, banks deposited a record 453.18 billion euros (US$591 billion) with the ECB on Tuesday, suggesting that banks remain reluctant to lend to each other amid ongoing market tension.

The figure broke a previous record set last week for the facility of 452.03 billion euros, the central bank said.

Heavy use of the facility suggests banks favour parking the money at low interest with the ECB rather than lending it to each other, fuelling worries that credit will dry up and exacerbate the region's cash crisis.

The move comes after the central bank last month lent a record 489.2 billion euros to 532 banks in a three-year refinancing operation to avert a possible credit crunch.

"Sentiment has soured once again as markets resume their focus on eurozone problems," said Mitul Kotecha, strategist at Credit Agricole in a note to clients.

"Markets are likely to find little respite today, with bond auctions in France and negative press reports about Spain set to garner attention," he told Dow Jones Newswires.

The euro -- which hit an 11-year-low of 98.71 against the yen early this week before rebounding -- remained under pressure.

In early European trade it fetched 99.32 yen and US$1.2938, compared with 99.28 yen and US$1.2941 in New York late Wednesday.

Oil extended its gains after hitting eight-month highs in New York late Wednesday as the European Union moved closer to imposing a ban on the import of Iranian crude over its alleged nuclear weapons programme. Europe is Iran's second-biggest oil customer.

Iran on Wednesday renewed its warning to close off the crucial Strait of Hormuz shipping lane if sanctions are imposed and warned the United States against keeping a naval presence in the oil-rich Gulf, further stoking tensions between the foes.

New York's main contract light sweet crude for delivery in February rose 42 cents to US$103.64 per barrel. The contract on Wednesday jumped to an eight-month high of US$103.74.

Brent North Sea crude for February delivery jumped 77 cents to US$114.47.

- AFP/ir

Source: http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/1174963/1/.html

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