Asian stocks hurt by grim consumer data from US
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News that Japan's economy had clawed its way out of recession in the second quarter could not prevent Asian equities from taking a beating on Monday as investors’ confidence was dampened by weaker-than-expected US consumer confidence.
AFP - Asian markets dived Monday, with China, Tokyo and Hong Kong taking the brunt after new US data overshadowed Japan's move out of recession and raised fresh concerns for global economic recovery.
The drop comes after several weeks of regional rallies, which have seen markets hit highs not seen since late last year before the impact of the global financial crisis began to take hold.
Shanghai led the falls, giving up 5.79 percent, while Tokyo slumped 3.10 percent, Hong Kong 3.62 percent and Seoul 2.79 percent.
Dealers took their cue from Wall Street, which lost 0.82 percent on Friday after weak consumer confidence figures threw into doubt hopes of an end to the worst global economic crisis for decades.
Selling pressure accelerated after news that the University of Michigan consumer sentiment index dipped to 63.2 from 66.0, below the consensus forecast of 69.0.
The survey, which suggested ongoing weakness in consumer spending, caused investors to re-assess prospects for economic recovery, a dealer said.
The losses came on the day that Japan, the world's second biggest economy, announced that it had moved out of recession.
The country rebounded for the first time in five quarters, following Germany and France in returning to positive growth.
Japan's economy grew 0.9 percent in April-June, after shrinking a revised 3.1 percent the previous quarter and by 3.5 percent in October-December 2008, the government said.
The figures were helped by data showing exports rebounded 6.3 percent in April-June -- the first increase in five quarters.
However, news that Japan's economy climbed out of recession had been widely expected and failed to give stocks a boost.
"Investors are not too optimistic about Japan's export-oriented economy," Mitsubishi UFJ Securities investment strategist Norihiro Fujito told Dow Jones Newswires.
Chinese shares have continued to take a hammering on worries that banks are about to slow down lending, causing a credit squeeze, and concerns over the health of corporate earnings.
Figures released last week showed new loans in China in July dropped to 355.9 billion yuan (52 billion dollars), less than a quarter of the level seen a month earlier.
The decline met expectations that banks would slow their lending pace after new loans surged to 7.37 trillion yuan in the first half.
"The large gains in the first half (created) a bubble in the market, so when the government showed signs of tightening bank credit there (was) a selloff," Great Wall Securities analyst Zhang Yong said.
Monday's fall marked the biggest daily percentage drop since November 18, when the index fell 6.31 percent to 1,902.43. However, the Shanghai market is still up almost 58 percent since the start of the year.
China's slump also weighed on Hong Kong shares as concerns over the world's third largest economy soured sentiment, with analysts pointing towards a slowing of liquidity inflows into the Hong Kong bourse.
European markets were also lower in early trade on Monday, with London's FTSE 100 down 1.47 percent, Paris's CAC40 lower by 1.65 percent and Frankfurt's DAX losing 1.62 percent.