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Asian traders bet against EU solution

Thursday, December 08, 2011 - 02:45

Dec. 8 - Asian markets sell off on Thursday as hopes for comprehensive debt restructuring measures from European leaders fade ahead of a key EU summit on Friday. Jon Gordon reports.

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PLEASE NOTE: EDIT CONTAINS CONVERTED 4:3 MATERIAL Another day, another turn in the markets. Asian stock portfolios are bleeding again this Thursday, battered not by regional concerns but instead by Europe. Tokyo, Hong Kong and Seoul exchanges all losing ground, a reversal from yesterday's positive sentiment. The see-saw trade this week is a reflection of the anxiety ahead of an EU summit ending on Friday -- with leaders searching for a solution to the debt crisis It's being heralded as a make-or-break meeting, but sources on the German side tell Reuters they are pessimistic on the chances of a deal. And even then, any agreement would focus on debt alone and not with how to grow Europe's economy, according to Saxo capital chief economist Steen Jakobsen. (SOUNDBITE) (English) CHIEF ECONOMIST, SAXO CAPITAL, STEEN JAKOBSEN, SAYING: "There's zero talk about how we grow Europe. There's zero talk about how you create a tripod solution where you involve the unions, the government and the private sector in a deal to how you increase your productivity. So I think Europe even though they have the best things going in terms of austerity and implementing debt breaks, will still be left with the fact that if you look at Europe as a balance sheet, the assets will not be growing while the liabilities will continue to grow." Pressure for a solution this Friday is coming from another camp, the credit agencies. The S&P threatened today to downgrade Europe's largest banks, following similar warnings on the sovereign ratings of the 15 euro zone countries this week. Chinese ratings agency Dagong went one step further, cutting both Italy and France in the last 24 hours. Haitong Securities' Yifan Hu says China and other emerging countries are willing to help, but only if some conditions are met. (SOUNDBITE) (English) HEAD OF RESEARCH AND CHIEF ECONOMIST, HAITONG INTERNATIONAL SECURITIES, YIFAN HU, SAYING: "The situation is quite tricky because I think Chinese and emerging countries, they want their investments and bailouts to be safe. So I think we need a framework to put the china and other emerging countries in." For now, action is expected from Europe's central bank -- with markets pricing in a 25 basis point rate cut from the ECB when it meets later today. Asian policy makers are worried as well -- Australia's central bank eased policy this week. South Korea held rates on Thursday but it cited the euro zone as one of their key concerns. With more than 10 of these European summits held this year, you can forgive Asian traders for being skeptical of the euro zone politicians. And a lingering crisis can only extend this period of uncertainty for the export-dependent region. Jon Gordon for Reuters in Hong Kong.

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Asian traders bet against EU solution

Thursday, December 08, 2011 - 02:45