Euro, stocks tumble on doubts over Greek bailout

May 3, 2010
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, HONG KONG, May 3 – The euro slipped and Asian stocks tumbled in thin trading on Monday on doubts about an enormous European bailout hammered out at the weekend to avert a crippling debt default by Greece.

Australian stocks also suffered after the government announced plans for a windfall tax on massive profits at mining companies, while fresh measures to curb red-hot property lending in China weighed on Hong Kong.

The European Union and International Monetary Fund on Sunday endorsed the 110-billion-euro rescue package, which is conditional on a swathe of painful cuts and tax rises by Greece.

However, the bailout must now pass through eurozone member parliaments, including Germany, where public resistance to the rescue package runs deep and where a major state election is due on Sunday.

"We still need the German parliament to approve (the bailout) and the other issue is the German election," Philip Wee, a senior currency economist with DBS Group Research in Singapore, told AFP.

The euro rallied last week in anticipation of the bailout, but it is "still too early" to tell if the EU\’s commitment will shore up the currency, Wee said.

The single European currency bought 1.3224 dollars at 0350 GMT in Asia, down from 1.3294 late in New York Friday, paring back early gains that saw it climb as high as 1.3332 dollars.

"Although Greece has had a lifeline from the IMF… the market is not assured that the worst has passed," said Thio Chin Loo, a senior currency analyst with BNP Paribas in Singapore.

Athens was desperate to get the bailout agreed before it faces a critical debt repayment on May 19.

But Greek unions vowed to battle the painful austerity measures, which include deep cuts to wages and pensions, a move that could further damage the struggling economy.

Hong Kong opened 1.31 percent lower a day after China ordered banks to increase the amount of money they must keep in reserve, as it tries to cap new lending to avoid a damaging property bubble.

The central People\’s Bank of China hiked the reserve ratio for commercial banks by 50 basis points effective May 10 — its third increase since the beginning of the year.

In Hong Kong, China Construction Bank fell 1.2 percent and Citic Bank was 2.9 percent off, while among property developers China Overseas Land was down 2.7 percent and China Resources Land dropped off 4.1 percent.

Shanghai was closed on Monday for a public holiday, as was Tokyo.

In Sydney, shares dropped 0.53 percent as mining stocks were hit by news of the government\’s 40-percent tax on extraordinary profits in the sector, which has boomed thanks to Asian demand led by China\’s hectic growth.

BHP Billiton slumped 2.6 percent to 39.72 dollars (36.76 US) and Rio Tinto fell 3.6 percent to 69.51 dollars. Macarthur Coal dropped 7.0 percent to 14.89 dollars.

Singapore slid 0.69 percent and Taipei was 1.06 percent off in line with a weaker Wall Street.

In New York, the Dow fell 1.42 percent on Friday following reports that banking giant Goldman Sachs could face a criminal investigation into allegations of fraud over its sale of mortgage products.

The dollar was trading at 93.90 yen compared with 93.85 in late Friday trade in New York.

Oil was higher, with New York\’s main contract, light sweet crude for June, up 16 cents to 86.31 dollars per barrel. Brent North Sea crude for June delivery rose 13 cents to 87.57 dollars a barrel.

Gold opened at 1,177.00-1,178.00 US dollars an ounce in Hong Kong, up from Friday\’s close of 1,171.50-1,172.50 dollars.

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