By Colin Ng and Leslie Shaffer
Of DOW JONES NEWSWIRES
SINGAPORE (Dow Jones)--Asian equity markets tumbled Friday, dragged by sharp losses in Wall Street Thursday as heightened concerns over European sovereign debt hurt demand. Resources stocks were hit hard as a spike in risk aversion and renewed strength in the U.S. dollar dented commodities.
"The concerns are global, with sovereign debt issues in Greece, Spain and Portugal affecting investor sentiment," said Macquarie Private Wealth Associate Director Marcus Droga in Sydney. Investors were worried that the European nations could not bring their budgets under control, jeopardizing a fragile euro-zone economic recovery.
Investors cashed out of stocks in the wake of the Dow Jones Industrial Average's 2.6% fall, for its biggest percentage-point drop since July 2.
Min Sang-il at E*Trade Securities in Seoul said: "Investors are anxious that more negative factors may emerge. European debt concerns have strengthened the U.S. dollar and this has stoked concerns that the dollar carry trade may end soon and risk aversion may heighten further."
Japan's Nikkei 225 was down 2.5%, Australia's S&P/ASX 200 lost 2.3%, touching five-month lows, and South Korea's Kospi Composite was down 3.1%. Hong Kong's Hang Seng Index dropped 2.9%, while on the mainland, the Shanghai Composite shed 1.8%. DJIA futures were 21 points higher in screen trade.
Resources and energy plays were among the region's biggest decliners as a stronger U.S. dollar spurred declines in underlying commodity prices. In Australia, heavyweights BHP Billiton shed 3.6% and Rio Tinto dropped 5.4%. Jiangxi Copper's Hong Kong-listed shares dropped 4.5% and its mainland-listed stock fell 3.5%.
Energy firms lost ground after crude futures dropped sharply Thursday. Australia's Woodside Petroleum fell 3.5%, Japan's Inpex lost 2.1% and Hong Kong-listed Cnooc fell 3.3%.
"We suspect that the bias in energy will be lower over the next two days, particularly if the dollar continues to regain its footing, as it seems to be doing over the past 24 hours," said Edward Meir at MF Global.
In Tokyo, Sony bucked the market, rising 0.3% after posting better-than-expected results for the fiscal third quarter after the market closed Thursday. Hitachi added 0.7% after posting solid results for the fiscal third quarter. But other key exporters fell, with Nikon losing 4.0% and TDK falling 4.5%.
"The stronger yen is offsetting positive sentiment in some exporters' earnings," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets, after the dollar dropped below the psychologically-important Y90 level Thursday.
Toyota Motor added 1.0% despite concerns it may have to extend its vehicle recall to its popular Prius hybrid model. Shares were boosted by its announcement Thursday that it swung into the black in the quarter ended December and now expects to post a profit for the full year. Toyota also raised its earnings forecast for the current fiscal year despite taking a hit from its massive vehicle recalls in Europe and the U.S.
In Korea, Taihan Electric Wire bucked the trend and rose 1.8% after the company sold its entire 9.9% stake in Italy's Prysmian SpA in a block sale for about KRW400 billion, or $348 million, to improve its financial standing. Taihan sold the stake for less than it paid.
Among other markets, New Zealand's NZX-50 lost 1.3%, Singapore's Straits Times Index shed 1.9%, Malaysia's KLCI fell 1.1%, Taiwan's Taiex dropped 4.2% and Philippine shares were down 1.9%. Thailand's SET index shed 1.4% and India's Sensex was down 2.1%.
In the foreign exchange market, the Swiss franc lost ground against the U.S. dollar and the euro, apparently led by intervention moves from the Swiss National Bank. The dollar was buying CHF1.0736, after earlier touching CHF1.0795, compared with CHF1.0666 in late New York trade Thursday. Against the euro, the franc traded at CHF1.4727 after hitting CHF1.4809 earlier.
Several traders in Tokyo said the SNB has been in market, and the main move did come in the euro/Swiss franc cross, which seems to have been the central bank's main intervention vehicle in recent times.
The U.S. dollar and the euro were also higher against the yen, buoyed by speculators covering short positions after sharp falls Thursday.
The dollar bought Y89.63, from Y88.94 in late New York trade Thursday while the euro fetched Y123.00 from Y122.20. The single currency was at $1.3715 from $1.3741.
The U.S. dollar was also stronger against Asian currencies as traders moved into the safe haven of the greenback. It was sharply higher against the Korean won, at KRW1,167.70 from KRW1,150.9 late Thursday in Seoul. Against the Singapore dollar, the greenback traded at S$1.4198, after touching its highest level since September 2009.
Still currency traders were particularly wary of key U.S. nonfarm payrolls data due later in the global day, especially after Thursday's news of worse-than-expected jobless claims. A flat reading was expected for January's payrolls, after December's 85,000 job drop.
Japanese government bonds were sharply higher as investors shied away from risk. Lead JGB futures were up 0.25 at 139.05 points and the 10-year cash JGB yield was down 2.0 basis points at 1.355%.
Spot gold was last bid at $1,065.10 per troy ounce, down $1.90 from late New York trade, after tumbling about $45 Thursday and breaking key technical support around $1,075.
March Nymex crude oil futures were up 12 cents at $73.26 per barrel on Globex after plunging $3.84 Thursday.
The three-month London Metals Exchange copper futures contract was stabilizing in Asia after its second consecutive session of heavy losses in London Thursday. The contract was at $6,373 per ton, down $7.00 from the London afternoon kerb after dropping 3.2% Thursday, hurt by the rallying dollar. LME three-month aluminum was at $2,045 a ton, up $1.00.
-Colin Ng, Dow Jones Newswires; +65-6415-4140; colin.ng@dowjones.com
