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Asian markets retreated on Tuesday following losses on Wall Street as dealers await a meeting of the US Federal Reserve policy committee hoping for a fresh round of stimulus measures.
Attention is also on Germany, where a court is due to rule on Wednesday on the constitutional legality of Berlin taking part in a rescue fund set up to support under-pressure countries.
Tokyo fell 0.70 per cent, or 61.99 points, to 8,807.38, Sydney’s S&P/ASX 200 closed 0.18 per cent, or 8.0 points, lower at 4,325.8 and Seoul lost 0.24 per cent, or 4.70 points, to close at 1,920.00.
In the afternoon Shanghai was off 1.16 per cent and Hong Kong shed 0.62 per cent.
“Recent weak economic data has led some to expect further stimulus, so investors are behaving cautiously until they see more policy signals,” Everbright Securities analyst Zeng Xianzhao told Dow Jones Newswires.
Euphoria has eased after Friday’s announcement from the European Central Bank that it will buy the sovereign bonds of debt-hit nations.
As global markets anticipated a rapid international rescue for Spain, the euro zone’s fourth-biggest economy, Prime Minister Mariano Rajoy refused to be rushed into a deal that dictates spending cuts or touches old-age pensions.
The Fed’s meeting has now become the main focus with hopes that Fed chief Ben Bernanke will unveil a third round of bond-buying, or quantitative easing, to kickstart the US economy, which has seen a stuttering recovery from the global downturn.
Those expectations were given more impetus Friday following a disappointing set of job figures.
With dealers taking a wait-and-see approach, Wall Street tacked back on Monday.
The Dow finished down 0.39 per cent, the S&P 500 dropped 0.61 per cent and the Nasdaq shed 1.03 per cent.
“Equity markets globally are consolidating after a pretty good run up since late last week,” John Milroy, investment advisor at Macquarie Private Wealth in Australia, said.
US indexes were also hurt by the Fed’s announcement that consumer credit fell in July after 10 months of gains, raising concerns about confidence while unemployment remains high.
Currency markets were cautious ahead of the Fed meeting.
The European unit bought 99.98 yen, compared with 99.86 yen late Monday in New York, while it also fetched US$1.2783 compared with US$1.2758 in US trade.
The single currency is down from the 100.21 yen and US$1.2811 in New York Friday after the ECB plans were unveiled.
In Asia on Tuesday the US dollar was at 78.21 yen, from 78.27 yen.
German judges are due on Wednesday to rule on whether the euro zone’s 500-billion-euro (US$640-billion) rescue fund, the European Stability Mechanism (ESM) and the EU fiscal pact are compatible with the country’s constitution.
The verdict is the last legal hurdle for the ESM before it can come into effect. While the verdict is expected to be positive, there are fears a decision against it could blow the whole euro zone project apart.
New York’s main contract, light sweet crude for delivery in October, fell 31 US cents to US$96.23 a barrel and Brent North Sea crude for October was 15 US cents lower at US$114.66.
Gold was at US$1,729.50 at 0640 GMT compared with US$1,732.83 on Monday.
In other markets:
-- Taiwan’s weighted index edged up 2.39 points, or 0.03 per cent at 7,485.13.
-- Wellington closed up 0.48 per cent, or 18.05 points, at 3,744.96.


ASIAN MARKETS: Asia on back foot ahead of US Federal Reserve meeting

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