Weak leads from US and Europe could push Asian shares lower

Negative leads from the US the Europe may cause Asian stocks to go lower again today.

Financial and banking shares were the largest losers on the S&P500 overnight with the industry group giving away more than 5.3%. The market continues to price in a negative fallout from the European debt situation with no silver bullet in sight.

US banks, which survived the financial crisis of 2009, might be in for more write downs and capital raisings in 2012. Traders are rerunning their numbers.

Overall, the S&P500 was 1.5% lower while the Dow Jones shed 1.3%. The Euro continues to decline against the dollar, last trading at 1.3182.

The focus for Asian traders remains the outcome of Chinese policy meetings which commenced this week and are expected to address the monetary situation in 2012. News coming out of the conference suggests tax cuts are likely, with the aim of increasing domestic consumption.

The government exceeded its fiscal receipts in 2011 and so there is room for these taxes, should policy makers see fit. The winners of such a policy would be the large multi0-national consumer companies – those selling goods and services into China.

The shift away from construction could see commodity prices like iron ore and copper moderate, in turn negative for large mining companies. This is not to suggest no demand at all for bulk and industrial commodities, but perhaps lower volumes when compared to the period between 2009-2011.

Copper continues to fall, down 2.9% overnight and last trading at US$3.44/lb. The next support level to watch is US$3.30/lb.

Gold likewise, despite its safe haven status, has fallen back below US$1670/oz. The Australian dollar, with close correlation to commodities, continues to decline and looks likely to test parity again.