Asian markets mixed after Wall Street rally

[You must be registered and logged in to see this image.]


HONG KONG: Asian shares were mixed Wednesday morning as a Wall Street rally prompted by reports of an EU plan to help troubled banks was offset by lingering fears that Greece's debt crisis will become contagious.

While US traders welcomed a coordinated effort by European leaders to recapitalise lenders, Asian traders were was more sceptical after news that Franco-Belgian bank Dexia had been broken up and Italy's debt rating had been cut.

Tokyo fell 0.83 percent by the break and Seoul lost 1.20 percent, but Sydney gained 0.98 percent and Singapore added 0.75 percent.

Hong Kong and Shanghai were closed for public holidays.

The region was given a strong lead from Wall Street, where the Dow closed up 1.44 percent, the S&P 500 rose 2.25 percent and the Nasdaq added 2.95 percent after the EU's Economic Affairs Commissioner said leaders were working on a plan to help banks.

"There is an increasingly shared view that we need a concerted, coordinated approach in Europe while many of the elements are done in the member states", the EU's Economic Affairs Commissioner Olli Rehn told the Financial Times.

"There is a sense of urgency among ministers and we need to move on," he added.

"Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty", Rehn said in comments run on the British newspaper's website.

But BBY senior institutional trader Peter Copeland warned in Sydney: "The market is going to treat this (US) rally with suspicion because there's no detailed plan (to contain the European debt crisis) yet."

"At the moment it's talk and nothing has been implemented," he told Dow Jones Newswires.

The lack of movement on a solution to the Greek problem raised the prospect that holders of Athens' debt, already expecting to take a 20 percent "haircut" on its value, could now find it written down more than 50 percent if it cannot raise any more money and defaults.

Pessimism over Greece has grown as European leaders are at odds over the best way to boost the ailing country and protect other economies and bond holders if it does eventually default.

In another blow to the euro area, Italy saw its government bond rating downgraded by Moody's on Tuesday, from Aa2 to A2 with a negative outlook.

The three-notch reduction exceeded analyst expectations of a one or two level downgrade.

Moody's cited risks for the financing of long-term debt and slow economic growth.

Italy, along with Spain, is another economy many fear could be in need of bailout cash.

The negative outlook, which suggests a further downgrade in the near future, "reflects ongoing economic and financial risks in Italy and in the euro area," the agency said.

The Moody's move came two weeks after fellow ratings agency Standard & Poor's downgraded Italy's sovereign debt rating, citing economic, fiscal and political weaknesses.

Adding to the unease over Europe's banks was news that France and Belgium were forced to intervene Tuesday to guarantee the financing of troubled cross-border bank Dexia.

After an emergency late-night meeting Tuesday, Belgium approved the creation of a so-called "bad bank" to house Dexia's riskiest debts while protecting its core business -- confirming its dismantling.

The lender was one of the first banks to be bailed out during the 2008 crisis.

The euro edged back down after a rebound in New York. It was at $1.3278 against $1.3338 late Tuesday in New York while it was at 101.80 yen versus 102.14 yen.

The dollar bought 76.65 yen, compared with 76.82 in New York.

New York's main contract, West Texas Intermediate for delivery in November, was up $1.91 to $77.58 per barrel.

Brent North Sea crude for November delivery gained $1.67 to $101.46.

By 0230 GMT gold was at $1,620.05 an ounce. (AFP)