Asia stocks up after Spain pledges to cut spending

Associated Press

BANGKOK (AP) — Asian stock markets rose Friday after Spain announced severe budget cuts meant to show international lenders and investors that the country is taking steps toward getting its debt under control.

The Spanish government on Thursday unveiled a draft budget for 2013 that cuts overall spending by €40 billion ($51 billion). Wall Street spurted higher on the news. Many economists see the cost-cutting as a signal Spain is preparing to request financial aid from other governments and the European Central Bank.

Spain, whose banks have been hobbled by toxic assets, has so far been reluctant to ask for help because of the requirements that will likely be imposed in exchange for any aid.

Stocks were also helped by speculation that China's central bank will act soon to help the world's No. 2 economy.

Lorraine Tan, director at Standard & Poor's equity research in Singapore, said she believes the Chinese government is likely to introduce incentives to encourage domestic spending rather than making more money available for loans, as the U.S. Federal Reserve has done under its quantitative easing programs.

"Banks are indicating that they are not finding takers for loans," Tan said.

"The Chinese have a lot of flexibility ... the question is, they will only act on it if they think it will achieve something."

Hong Kong's Hang Seng Index rose 0.4 percent to 20,836.06. South Korea's Kospi added nearly 0.2 percent to 1,992.12 and Australia's S&P/ASX 200 gained 0.2 percent to 4,394.10. Benchmarks in Singapore, Taiwan, mainland China, Thailand and the Philippines also rose.

But Japan's Nikkei 225 index lost 0.8 percent to 8,876.77, sinking on a government report that showed industrial production fell a further 1.3 percent in August. Weak global and domestic demand is weighing on manufacturers, particularly electronics makers, who are facing intense competition from South Korean, Taiwanese and other Asian manufacturers.

The strong yen, which erodes overseas earnings and makes Japanese-made products relatively more expensive, is also eating into profits.

Major Japanese exporters got slammed. Toyota Motor Corp. fell 2.3 percent and Honda Motor Co. shed 2.7 percent. Ricoh Co. slid 3 percent.

Rising gold prices helped related shares. Hong Kong-listed Zijin Mining Co., China's largest gold miner, gained 2 percent. Australia's Newcrest Mining Ltd. jumped 3.8 percent.

Spain's budget announcement propelled Wall Street stocks to their first gain of the week, despite mixed data on the U.S. economy.

The Dow Jones industrial average rose 0.5 percent to 13,485.97. The S&P 500 index rose 1 percent to 1,447.15. The Nasdaq composite index rose 1.4 percent to 3,136.60.

The U.S. government said the overall economy grew at a slower annual rate in the April-through-June quarter than it previously estimated. Companies cut orders for durable goods last month. But the number of Americans seeking unemployment benefits fell.

Benchmark oil for November delivery was up 49 cents to $92.34 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.87 to finish at $91.85 on the Nymex on Thursday.

In currencies, the euro rose to $1.2932 from $1.2917 late Thursday in New York. The dollar fell to 77.50 yen from 77.62 yen.

View Comments (1)