By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) — Asia stocks slipped on Wednesday, with the health of the U.S. economy back on the agenda as investors looked toward January’s looming tax hikes and spending cuts.
The Nikkei Stock Average JP:100000018 -0.79% lost 0.8% in Tokyo trading, backing away from a seven-month high, while South Korea’s Kospi KR:SEU -0.83% fell 0.9% in Seoul, and Australia’s S&P/ASX 200 index AU:XJO -0.29% declined 0.5% in Sydney.
The Hang Seng Index HK:HSI -0.84% fell 0.7% in Hong Kong, while the Shanghai Composite index CN:000001 -0.69% lost 0.4% after touching a four-year low in the previous session.
Investors in Chinese shares were concerned about the outlook for corporate profits. The Organization for Economic Cooperation and Development said Tuesday in the latest edition of its twice-yearly economic outlook that “inventory levels at Chinese companies have been rising, bringing the risk of destocking if falling profitability puts pressure on companies to raise cash.”
OECD Secretary-General Angel Gurría also warned that “the world economy is far from being out of the woods” and that “the U.S. ‘fiscal cliff,’ if it materializes, could tip an already weak economy into recession, while failure to solve the euro-area crisis could lead to a major financial shock and global downturn.” Read: OECD: Fiscal-cliff failure could trigger recession
U.S. stocks ended with losses Tuesday amid fresh concerns about the possibility of more than $600 billion of automatic tax hikes and spending cuts in January triggering weakness in the U.S. economy, as politicians continue to speak out about the issue.Read: U.S. stocks fall on fears debt talks have stalled
Tuesday saw Senate Democratic Leader Harry Reid say that there had been “little progress” made toward reaching a deal by the end of the year. See full coverage of the upcoming "fiscal cliff".
The same concerns also hit the foreign-exchange market. BNP Paribas strategist Vassili Serebriako said that “clearly, as long as fiscal-cliff uncertainty is not resolved, the U.S. dollar is likely to see bouts of safe-haven demand.”
The ICE dollar index DXY +0.01% built on Tuesday strength during Asian trading hours Wednesday, reaching 80.405, from 80.344 in late North American trading. Read: Dollar gains after U.S. data, Greek deal
Gold futures, on the other hand, extended losses from Tuesday as the precious metal, along with other dollar-denominated commodities, reacted to the dollar’s strength. Read: Gold settles lower for a second straight session
Amid the weakness for commodity futures, energy firms fell in Hong Kong, with Cnooc Ltd. HK:883 -2.07% CEO -1.17% down 2.1% and PetroChina Co. HK:857 -1.75% PTR +0.17% lower by 1.4%.
Aluminium Corp. of China Ltd. ACH -1.30% HK:2600 -1.81% CN:601600 -0.64% declined by 1.5% in Hong Kong and by 0.4% in Shanghai, while Wuhan Iron & Steel Co.CN:600005 -4.69% lost 2% in mainland Chinese trading, and Angang Steel Co.CN:000898 -2.36% fell 1.8% in Shenzhen.
Metal firms also fell in Australia, with miner Rio Tinto Ltd. AU:RIO -1.89% RIO -1.93% down 2.1%, and rival BHP Billiton Ltd. AU:BHP -0.88% BHP -0.80% lower by 1.1%.
Mining services firm NRW Holdings Ltd. AU:NWH -17.22% tumbled 15.3% after flagging an expected fiscal-year revenue and margin reduction at its mining division.
Over in Tokyo, Japanese electronics firm Canon Inc. JP:7751 -2.37% CAJ -0.60% lost 2% after a Nikkei report that it is seeking to drastically shrink its consolidated inventory by the end of the year after its stocks hit a high in September not seen since 2008.
Fujitsu Ltd. JP:6702 -1.97% FJTSY 0.00% traded down 1.6% after a separate Nikkei report that it will allocate some 100 billion yen ($1.2 billion) to add needed capital to a pension fund at its U.K. unit.
Exporters were generally weak in Japanese trading Wednesday, as the yen remained in a tight range against the dollar and euro.
Major exporters had led much of the gains for the Japanese index over the past days, but Wednesday morning saw Pioneer Corp. JP:6773 -5.91% PNCOF -35.19% retreat 5.9%, while car maker Mazda Motor Corp. JP:7261 -2.34% MZDAF +7.45% lost 2.3%.
Sony Corp. JP:6758 -1.35% SNE -1.62% fell 1.1% amid a Reuters report that investment banks had approached the firm over the possible sale of its battery-making business.
In Seoul, technology firms also saw losses, with LG Electronics Inc. KR:066570 -2.60% LGEIY 0.00% down 2% and SK Hynix Inc. KR:000660 -0.39% HXSCL 0.00% down 1.8%.
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