By Tom Miles
HONG KONG, Jan 30 (Reuters) - Investors gave short shrift
to hopes of the U.S. Federal Reserve rescuing the world economy
with a further interest rate cut on Wednesday and continued to
bet on a bad year, selling stocks and the dollar and buying
bonds.
Financial bookmakers in London expected Britain's FTSE 100
<> index to open between 12 and 29 points lower, the
German DAX <> 16 to 23 points down and the French CAC 40
<> 10 to 20 points lower.
Investors are counting on the Fed announcing a 50 basis
point cut in U.S. interest rates at about 1915 GMT on
Wednesday, which would lean further on the dollar to give the
U.S. economy a second boost in eight days, rounding off one of
the steepest rate-cutting episodes since the early 1980s.
[]
Before the Fed takes centre stage, a first estimate of U.S.
fourth-quarter gross domestic product at 1330 GMT will set the
mood for financial markets, providing clues on whether the
world's largest economy can avoid a recession.
With a rate cut factored in, Asian markets returned to
worrying about the bigger picture and by 0638 GMT, MSCI's
measure of Asia Pacific stocks excluding Japan <.MIAPJ0000PUS>
was down 2 percent.
The Korea Composite Stock Price Index <> sank 3
percent to its lowest close since May 9, dragged down by fears
of a thinner order book for the world's top shipbuilder,
Hyundai Heavy Industries Co <009540.KS>, which tumbled almost
11 percent.
"Markets are failing to keep up with a firmer Wall Street
as foreign investors keep selling local stocks," said Sung
Jin-kyung, an analyst at Daishin Securities in Seoul.
"I think the Fed will slash rates by half a percentage
point tonight, which will provide relief in the short term. But
again, this is not going to fundamentally change the view of
the U.S. economy. Subsequent macroeconomic data will have to
show the economic stimulus measures are indeed making an
impact."
To darken the mood further, some doubts about the widely
heralded 50 basis point cut crept in after U.S. data showed
stronger-than-expected data on consumer confidence and durable
goods orders, which raised fears of a mere 25 bps trim.
For more on the Fed, please click on []
"IT'S NOT THAT SIMPLE"
In Japan, the benchmark Nikkei 225 <> closed down 1
percent. Kyocera Corp <6971.T> and other chip-related shares
slid after a barrage of bad news and banks tumbled following
reports that Mizuho Financial Group <8411.T> was considering
injecting an additional $1.9 billion into its unit Mizuho
Securities, as the brokerage continues to falter from subprime
investments.
"If the Fed acts as the market expects, this means there
will be few major factors remaining for the market to trade on,
and investors here in Japan are worried that Wall Street could
fall as a result," said Tsuyoshi Segawa, an equity strategist
with Shinko Securities.
Japan is also waiting for earnings from a slew of major
companies on Thursday. After Wednesday's close, Canon Inc
<7751.T> posted quarterly results and a 2008 outlook that
missed market expectations.
Australia's benchmark S&P/ASX 200 index closed down 1.7
percent.
With the dollar expected to be weakened by the Fed's move,
crude oil prices <CLc1> climbed to a two-week high above $92 a
barrel, helped by expectations OPEC will leave production
levels unchanged when it meets this week in Vienna, despite
calls from the U.S. and other consumers for the cartel to bring
down prices.
Gold <XAU=> lingered around $920 an ounce, just shy of its
latest record.
Japanese government bonds hovered in anticipation of the
Fed move and investors took a wait-and-see stance as a 25 bp
cut could prompt those who have expected more aggressive
monetary easing to dump Treasuries, while disappointed
investors could sell stocks to seek the safety of government
debt.
"One cannot say that a smaller cut is negative for
Treasuries and a bigger one is positive," said Akihiro Nishida,
senior economist at Mitsubishi UFJ Securities. "This time it's
not that simple."
