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Asian stocks fall, indicate rush to safety

Asian stocks fell more than 5 percent Friday, after the worst day on Wall Street since December 2008.

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Within Asia, markets with high trade exposure to the West and reliance on commodities looked particularly vulnerable.

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Taiwan, where the technology sector makes up about half of the equity market capitalization and depends heavily on exports to developed countries, is a weak point in Asia.

The benchmark stock index in Taiwan led Asia, falling 5 percent .

Europe, where overloaded national balance sheets have bedeviled politicians struggling to grasp the implications, is currently in the eye of the storm.

Italian and Spanish bond yields have kept rising and German bond yields falling, widening spreads the most since the euro was born and causing deep-seated fears about what else policy makers can do to keep the euro zone together.

The European Central Bank resumed buying government bonds after a four-month break and announced new longer-term funding for liquidity-starved banks, investors kept selling peripheral European bonds.

Traders went warily back to the yen. The dollar was down 0.4 percent to 78.83 yen , a day after Japan reportedly spent a record 4 trillion yen ($50.6 billion) to weaken its currency and bolster its export competitiveness.

U.S. 10-year Treasury futures ticked up 6/32 to 128-6/32 , just below the Thursday high of 128-12/32, which was the highest since December 2008. The cash yield was at 2.42 percent , a basis point higher than late New York on Thursday when the 10-year yield hit the lowest since October 2010.

The yield has sank 37 basis points so far in August, as a wall of worry sends investors to the most liquid bond market in the world.

Commodity markets extended heavy overnight losses on fears of slowing demand.

U.S. crude for September delivery fell 1 percent to $85.75 a barrel after plunging as much as 6 percent on Thursday and closing at the lowest since February 2011.

In an ominous sign, gold prices were soft despite the spiraling fears hurting risky markets. Investors were having to sell gold positions to cover losses elsewhere in their portfolios.

Spot gold prices eased $3.71 an ounce to $1,644.19 after hitting a record around $1,681 an ounce on Thursday before losing some of the gains.

"This will not be a quiet day. Liquidity will be at a premium," a sales trader with a European bank said.

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