SINGAPORE (Dow Jones)--Asian shares tumbled while gold prices surged to a record Monday as investors bailed out of risky assets after Standard & Poor's historic downgrade of U.S. government debt triggered fresh concerns about the outlook for global growth.
Dow Jones Industrial Average futures dived over 300 points in screen trade, and were recently off 265 points. Surging gold and slumping oil future prices underscored investor concerns.
"Markets have been choppy and illiquid; the broad bias is for further decline in risk appetite...despite attempts by policymakers to allay concerns," said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.
Stock market losses deepened as the day wore on. Japan's Nikkei Stock Average fell 2.1%, Australia's S&P/ASX 200 lost 2.4% after earlier slipping to a fresh two-year low, South Korea's Kospi Composite fell 4.3% and India's Sensex was down 3.0%. The Shanghai Composite Index dropped 3.7% and Hong Kong's Hang Seng Index slid 4.0% - both tapped 13-month lows earlier. Oil prices fell, with the September Nymex crude oil futures recently down $2.94 at $83.95. Spot gold enjoyed a rush of safe-haven demand and rose to a record $1,704.30 per troy ounce, and was recently fetching $1,702.40, up $39 from its New York trade.
The U.S. dollar was broadly lower. However, the greenback and Treasurys were resilient, reflecting their safe-haven appeal as the implications of S&P's move to strip the U.S. of its pristine AAA rating began to sink in.
Traders remained on edge despite the Group of Seven industrial nations Monday pledging a coordinated effort to ensure financial markets have enough liquidity.
"By a number of metrics, financial conditions are the worst since the Lehman debacle," Brown Brothers Harriman said in a note to clients.
The 10-year Treasury yield earlier increased to 2.579%, from 2.563% at Friday's New York close, while the yield on two-year Treasurys fell to 0.268% from 0.292% late Friday, contrary to some predictions of a much more aggressive initial market reaction.
Safe-haven demand boosted the yen and Swiss franc; the early focus in currency markets was on the European Central Bank's emergency meeting with traders expressing disappointment policy makers didn't spell out their intentions to buy bonds from heavily indebted Spain and Italy. Both countries have emerged as new flash points in the euro zone's latest crisis.
The euro was at $1.4318 from $1.4280 late Friday in New York, having climbed to $1.4429 earlier in choppy trade. The dollar was at Y78.16 from Y78.48, while the euro was fetching Y111.91 from Y111.01. The dollar was at CHF0.7604 against the Swiss franc, from CHF0.7673 after hitting a new record low just below CHF0.7500 earlier.
Commodity-linked currencies like the Australian dollar, were hit hard; it was trading at US$1.0340 from US$1.0391 earlier and US$1.0447 late Friday.
Cyclical and growth-sensitive stocks were lower across all markets; Sony fell 3.8% in Tokyo, Samsung Electronics lost 1.4% in Seoul and BHP Billiton fell 3.1% in Sydney.
Banks and financial stocks were also dragged by the S&P news with Sumitomo Mitsui Financial Group down 2.9% in Tokyo, Woori Investment & Securities down 7.7% in Seoul while Bank of China fell 2.0% in Shanghai.
-Shri Navaratnam, Dow Jones Newswires; +65-6415-4142; shri.navaratnam@dowjones.com
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