Sell-off in US and Europe will push Asian shares lower

<p>Asian stocks will continue to take negative leads until the U.S. fiscal situation is solved, hopefully towards the end of this week. Overnight, European and […]</p>

Asian stocks will continue to take negative leads until the U.S. fiscal situation is solved, hopefully towards the end of this week.

Overnight, European and U.S. equities were heavily sold off on a range of issues, the most important was an absence of any good news, or circuit breaker, in an otherwise bleak global economic environment. Corporate earnings are starting to feel the pressure of this economic slowdown.

Computer maker Hewlett Packard forecast first quarter earnings recently missed estimates as personal computer sales slump. Earnings have been revised down to 83 cents per share from 86 cents per share.

We note this because trends in U.S. consumer electronics companies resonate with many Asia Pacific technology manufacturers particularly chip makers. The main news overnight was focused on the failure of lawmakers in the U.S. to reach an agreement on fiscal measures needed to address the rising debt situation.

Copper is a leading indicator of economic growth and it took another 3% tumble overnight but we also note LME stockpiles have been falling so there doesn’t seem to be a large overhang of supply on face value. The real test will be at the critical US$3/lb level which could eventuate should equity markets continue falling.

In regional currencies, risk tolerance it definitely reversing, as illustrated by the Australian dollar which fell below 99.00 US cents overnight and was last trading at around 98.38. The Japanese yen continues to hold on to its gains, with the USD/JPY last trading at around 76.88.

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