Recent history reminds us that politicians often get rather creative with their language during times of crisis.
The vernacular becomes even more varied when the crisis in question is one of a financial nature; one which offers leaders ample opportunity to blind the electorate with science and, sometimes, mask the blindingly obvious.
Hong Kong, China (CNN) – Washington’s debt deadlock continued to rattle markets here in Asia-Pacific. We saw steeper declines than those on Wednesday with financial-related stocks weighing heavy on bourses across the region.
The Nikkei closed down 1.45% breaching that psychological 10,000 point mark to close at 9,901.35. Auto exporters and financials led today’s slide. Toyota and Nissan each fell more than 2%; Mitsubishi UFJ and Sumitomo Mitsui closed down about 1.5%. One of the biggest losers of the day was in the tech sector: Advantest fell by nearly 7%. The world’s largest maker of memory-chip testers announced its operating profit fell more than 50% from last year. On the flip side, Hitachi Construction jumped nearly 4% after a surge in its Q2 net profit.
The Hang Seng ended nominally higher, rising 0.13% to close at 22,570.74. It was a similar picture to that on the Nikkei with financials leading the fall. China Construction Bank closed down 0.94% while Industrial and Commercial Bank of China closed down 1.67%.
Financials dragged things down on the mainland as well. The Shanghai Composite closed down 0.54% to end at 2708.78. Beijing has also ordered new directives on loans, particularly in real estate, which soured that industry’s mood.
The Seoul Kospi followed the region lower to close 0.85% at 2,155.85. Asiana Airlines fell 4.74% after one of its cargo planes crashed earlier Thursday morning. Meanwhile, insurance companies were rattled by continued torrential rains slamming the country. LIG Insurance closed down 0.55%, Dongbu Insurance paired earlier losses to close exactly flat at 0.00% while Samsung Fire & Marine pulled out of earlier negativity to post a gain of 0.85% at the close.
Down under, the ASX 200 fell 1.62% to close at 4463.80 with financials and retailers leading the slide. Investment bank Macquarie Group closed down about 4.5%. Wesfarmers, the country’s second biggest retailer, fell about 2.39%. Retailers are worried about a possible interest rate hike in August when the Reserve Bank of Australia next meets. That follows yesterday’s higher than expected consumer price index figure of 0.9%. A reading of 0.7% was expected.
Asia-Pacific Currencies Gain
Major currencies in the Asia-Pacific strengthened against the U.S. dollar yet again as faith in the greenback – and Washington – continues to waver.
Over the past year, the U.S. dollar has weakened by almost 10% on the same-named U.S. dollar index. That measures its value against a basket of major world currencies including the Euro, the Japanese yen and the British pound.
In just the past month, when U.S. debt ceiling talks began to come to a boil, the Japanese yen has strengthened by nearly 4%. That has occurred against the backdrop of growing fears about the U.S. with investors moving into the safety of the Japanese currency.
And it’s a similar story with the Australian dollar. In the past month the currency has strengthened about 4.5% against the greenback. Last October it reached 1-to-1 parity with the U.S. dollar and it has not looked back since. Just yesterday, the Aussie neared a 30-year high on fears about the U.S. debt ceiling, compounded by that higher than expected CPI.
We’ve seen the same strengthening in theSingaporedollar. In the past month it’s strengthened about 3% against the dollar.
What does this mean?
There are winners and there are losers. It hurts exporters as it reduces their profits when they repatriate their earnings back home. It impacts travelers carrying U.S. dollars as it weakens their buying power in countries with stronger currencies. However, it may give a lift to retailers as the buying power of domestic consumers strengthens as consumers get more bang for their buck.
China extracts and produces about 95% of the world's rare earth minerals, and since last year it has cut its exports. The World Trade Organization recently ruled China's export quotas on certain raw materials violate international trade laws. Japan, the EU and the United States have all contested that China's quotas drive up the price of products, while China argues that it's trying to protect the environment by foraging less land for rare earth minerals.
So why should you or I care about the global spat over rare earth minerals? I posed that question to American David O'Brock, the CEO of Molycorp Silmet AS, a rare earth processing plant in Estonia.
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