Asian Shares Down on Concerns About Credit Crunch

Asian trade: Asian shares are extending the losses from the last few weeks of trading. Fears that the credit crunch already spilled over the real economy, eroding profits and affecting the macro-economy over the long term, are eroding investors’ confidence in the market. It looks like the same things are also in the inter-bank market, where the spread is at a record high. The cost of protecting assets from default is still way above the last year’s average, while the cost of additional capital in the money markets is at the highest point in comparison to last year. It is very likely the number of bankruptcies will rise exponentially in the coming months, especially if conditions do not improve substantially.

Asian shares are trading on the negative side, even though commodity stocks, which were responsible not long ago for dragging the market higher, are trading on the green. The Nikkei declined 52.96 points (0.42%) to 12,724.75 after another important real estate company from Japan filed for bankruptcy. The Australian S&P/Asx fell 12.70 points (0.25%) to 4,994.80.

Gold rose as a gain in energy costs revived demand for the precious metal as a hedge against inflation. Bullion for immediate delivery advanced $4.90 (0.59%) to $833.00.

Crude oil traded mixed after rising more than $1 a barrel yesterday on forecasts showing that Hurricane Gustav may enter the Gulf of Mexico, which is home to more than a fifth of U.S. oil production. Crude oil for September delivery gained $0.33 (0.28%) to $116.60.

Previous Wall Street trade: Stocks moved between gains and losses on Tuesday, as oil caught a bid on speculation that Hurricane Gustav might disrupt crude production in the Gulf of Mexico. Traders were encouraged, but cautious, when a report on home prices showed that the pace of home price decline was slowing and a report from the government showed that new home sales increased 2.4% in July.

Previous European trade: European stock markets declined amid more bad news yesterday morning, but closed the session mixed. Concerns about the credit crisis, inflation, rigid consumers and a weak business outlook hit the market today, all at the same time. During the European session, economic releases showed business expectations and current business conditions sank to a five-year low, due to an imminent slowdown in developed economies.