Asian markets down on concern about Japan, US

BEIJING (AP) — Asian stocks fell Wednesday amid concern about a lack of new Japanese moves to calm bond markets and uncertainty about the outlook for U.S. monetary policy.

Oil prices fell to below $95 per barrel amid concern central bankers around the world might ease off measures to boost the global economy.

Investors were disappointed after Japan's central bank failed to deliver expected measures Tuesday to ease bond market volatility. Instead, the bank only upgraded its economic outlook.

Tokyo's Nikkei 225, the regional heavyweight, shed 0.1 percent to 13,291.10, after spiking up nearly 5 percent Monday after the prime minister promised new tax cuts. Markets in China, Hong Kong and Taiwan were closed for a holiday.

Seoul's Kospi shed 0.6 percent to 1,909.07 while Sydney's ASX S&P 200 fell 0.7 percent to 4,723.20. Singapore's FTSE Straits Times index lost 0.2 percent to 3,163.35 while India's Sensex lost 0.3 percent to 19,085.49. Jakarta and New Zealand also fell.

"Riots in Istanbul, central banks raising stop signs, bond yields on the rise and equity markets skidding; brace yourselves, we are in for a very rough ride over the coming weeks," Evan Lucas, market strategist for IG in Melbourne, said in an email commentary.

On Wednesday, Indonesia's central bank raised interest it pays on overnight deposits by banks by 0.25 percentage points to 4.25 percent in response to capital outflows. Analysts had expected such a move but not so soon.

Uncertainty about China's recovery has weighed on markets following weekend data showing exports, retail sales and other indicators weaker than expected.

Trading this week has been lackluster following a volatile period that saw many major markets come off multiyear or even record highs.

Major indices in the United States, Britain, France and Germany all fell Monday.

Investors also closely watching the United States and whether the Federal Reserve eases its monetary stimulus. The Fed has been buying bonds to push down market interest rates.

Speculation that the Fed might wind down its stimulus had depressed stock prices but concern eased after last week's U.S. jobs data suggested a recovery might not be strong enough yet.

The euro has gained on easing expectations of tighter U.S. monetary policy despite uncertainty about the outlook for the 17 countries that use the common European currency. But on Wednesday, the euro slipped to $1.3300 from $1.3311 late Tuesday in New York. The dollar rose to 96.86 yen from 96.22 yen.

Benchmark crude for July delivery declined 84 cents to $94.54 per barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract fell 39 cents to settle at $95.38.

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European debt woes stalk markets (AP)

LONDON – Worries over Europe's debt crisis kept markets on edge Monday, following a warning over Italy's credit rating and a failure by eurozone finance ministers to agree an immediate release of bailout funds to Greece.

Though the finance ministers of the 17 countries that use the euro agreed to hand over the next bailout installment, worth euro12 billion ($17 billion), they said they would only do that if the Greek Parliament backed further austerity measures.

With the Greek government facing a confidence vote in Parliament on Tuesday, there's still an element of political risk and that's clearly weighing on markets at the start of a week that's likely to be dominated again by the country's woes. Though Prime Minister George Papandreou's newly-reshuffled government is expected to prevail in the confidence vote, there's still uncertainty over the passage of another euro28 billion in austerity measures.

"Until markets see some solid plans put in place to deal with Greece, the markets are only going to be heading in one direction," said Simon Furlong, a sales trader at Spreadex.

In Europe, the FTSE 100 index of leading British shares was down 0.7 percent at 5,676 while Germany's DAX fell 1 percent to 7,093. The CAC-40 in France was 1.1 percent lower at 3,783.

The biggest faller of Europe's main stock markets was Italy's FTSE MIB index, which was trading 2.5 percent lower at 19,597, after Moody's warned Friday that it may downgrade its Aa2 rating on the country.

U.S. markets were also set to shed all the gains posted on Friday, when Germany appeared to back a plan to bailout Greece for a second time. Dow futures were down 0.4 percent at 11,886 while the broader Standard & Poor's 500 futures fell a similar rate to 1,261.

The euro was 0.3 percent lower at $1.4234, having enjoyed a rally Friday after German Chancellor Angela Merkel indicated that private creditors, such as banks, would not be compelled to share any pain in a second bailout of Greece. Instead, she backed the line touted by the French government and the European Central Bank that any private sector involvement has to be on a "voluntary" basis.

"The whole concept of voluntary participation of private investors in roll-overs of debt does not appear to have been resolved leaving the financial markets skeptical of the plan that includes true voluntary participation," said Derek Halpenny, European head of global currency research at The Bank of Tokyo-Mitsubishi UFJ.

As the week progresses, attention will shift to the U.S. and the Federal Reserve's rate-setting meeting. As well as keeping its benchmark rate unchanged at near zero percent, the Fed is expected to confirm that its current monetary stimulus will end as expected at the end of this month.

Earlier in Asia, Japan's Nikkei 225 was one of the few benchmarks posting gains for the day. The benchmark gained less than 0.1 percent close at 9,354.32 despite data showing the country's exports dropped for the third straight month in May due to massive production losses following the March 11 earthquake.

South Korea's Kospi sank 0.6 percent to 2,019.65, while Hong Kong's Hang Seng shed 0.4 percent to 21,599.51

Mainland Chinese shares extended losses for a fourth straight trading session amid a lack of funds as banks complied with the central government's latest order to raise the level of deposits they must hold as reserves.

The Shanghai Composite Index lost 0.8 percent to 2,621.25, its lowest close this year, while the Shenzhen Composite Index lost 1.1 percent to 1,073.19.

In the oil markets, worries over the global economy pushed prices lower again. Benchmark oil for July delivery was down $1.24 to $91.77 a barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.

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Left-winger Humala wins Peru election, markets plunge (Reuters)

LIMA (Reuters) – Left-wing former army commander Ollanta Humala won Peru's presidential election and vowed the poor will share in the country's new wealth but financial markets plummeted on fears that he will ruin the economy.

Humala claimed victory and results from 89 percent of ballot boxes gave him a slim but growing lead of more than 2.7 percentage points over right-wing lawmaker Keiko Fujimori, the daughter of jailed former President Alberto Fujimori.

Peru's stock market sank more than 12 percent, while the sol currency fell 1.5 percent, prompting the central bank to offer to sell about $215 million in deposit certificates aimed at curbing the currency's fall.

Humala has dropped some of his more radical proposals since narrowly losing the last election in 2006 and senior advisers tried to reassure markets on Monday that he will run the economy prudently, but many investors simply don't trust him.

Shares in mining companies fell as much as 15 percent because Humala has said he wants to impose a windfall tax Humala on Peru's vast mining sector.

Top companies in neighboring Chile with operations in Peru also saw their shares fall sharply while Peru's sovereign bonds plunged in New York on the vote outcome.

Investors worry that Humala, who takes office on July 28, will increase state control over the economy and throw away fiscal discipline.

They are keenly awaiting his picks for finance minister and central bank chief as a sign of whether he will adopt moderate policies or push for radical change. It is not clear when Humala will start making his key appointments.

Kurt Burneo, a top economic adviser to Humala and a former central bank and finance ministry official tipped as a possible finance minister in the next government, said that those selling Peruvian assets would get burned.

"Those speculating now are simply going to lose their money because everything is very solid," Burneo told Reuters.

He said Humala guarantees counter-cyclical fiscal policy, will respect the central bank's independence as well as investments made by private companies, and will further cut Peru's debt-to-GDP ratio.

Peru is a major metals exporter and one of the world's fastest-growing economies over the past decade, but a third of its people are stuck in poverty and Humala has promised to spread around the benefits of the economic boom.

'SOCIAL INCLUSION'

"We want economic growth with social inclusion," Humala, 48, told thousands of cheering supporters at a rally in downtown Lima that stretched into the early hours of Monday. "We can build a more just Peru for everybody."

Thousands of followers danced in jubilation, chanting "Humala Presidente! and "Fujimori never again."

After losing the 2006 election, Humala toned down his anti-capitalist policies to try to win over centrist voters.

He vows to run a balanced budget, bring experienced technocrats into his government and respect foreign investors who plan to spend $40 billion on mining and oil projects in Peru in the next decade.

He also vows to give the poor a greater share of natural resource wealth and end social conflicts.

Another of Humala's chief economics advisers, Felix Jimenez, who is seen as a possible central bank chief, said the government and central bank both had instruments to fend off a rout, and insisted that investors have nothing to fear.

"Our economic proposals are totally sensible: to maintain macroeconomic equilibrium, consolidate growth and create conditions for private domestic and foreign investment growth," he told Reuters.

Fujimori, 36, was favored by business leaders but many voters rejected her because her father is serving a 25-year prison sentence for corruption and using death squads to crack down on suspected leftists when he was president in the 1990s.

Humala, who as an army commander led an unsuccessful revolt against the elder Fujimori in 2000, had hammered his rival for working in her father's authoritarian government.

Fujimori warned Humala could wreck Peru's economy by dismantling the free-market reforms begun by her father. Those reforms helped set the stage for unprecedented growth in the past decade as Peru left behind the hyperinflation and guerrilla wars of the 1980s and '90s.

Critics say Humala is still a hard-liner at heart who will take over private firms and try to change the constitution to allow himself to run for consecutive terms like his one-time mentor, Venezuela's firebrand leftist leader Hugo Chavez.

"Humala has four different manifestoes. He doesn't convince me and represents a return to militarism of the past," said 35-year-old security guard Julio Cauche.

Humala says the state must vigorously regulate the economy, although he has ruled out taking over private firms.

"It is not positive news," Alberto Bernal, head of research at BullTick Capital Markets in Miami, said of Humala's victory. "There is really no reason for an investor to be hopeful.

Humala says he has left his radical past behind and that he will only serve one term. He insists he is a moderate leftist like Brazil's former President Luiz Inacio Lula da Silva.

Highly disciplined from his military days, Humala jogs around his neighborhood each morning and keeps his hair cropped short. His entourage calls him "comandante."

He is likely to forge closer ties with Brazil's center-left government, reinforcing Brazil's growing influence in South America at a time of U.S. economic stagnation.

(With reporting by Terry Wade, Patricia Velez, Marco Aquino, Simon Gardner in Lima and Manuela Badawy, Daniel Bases and Walter Brandimarte in New York; Editing by Kieran Murray)

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