Aug. 24 - Asian shares fall as a rally fuelled by speculation that the Federal Reserve may signal further moves to support the struggling U.S. economy fizzles out; gold rebounds from its sharpest one-day slide in 18 months. Toshi Maeda reports.
Asian shares declined on Wednesday (August 24) after a short-lived rally fuelled by speculation that the Federal Reserve may signal support for the struggling U.S. economy. Japan's Nikkei 225 lost 1 percent after a Moody's downgrade of Japan's sovereign debt rating spurred profit taking. The ratings agency cut Japan's credit rating by one notch to Aa3, blaming large budget deficits and a debt buildup. Australian shares ended largely flat, reversing early gains as banks, mining and energy firms went into retreat in tandem with Asian bourses after Japan's credit downgrade. China's benchmark index closed down a half percent as the MSCI's Asian-Pacific shares index lost nearly 1 percent. The dollar fell slightly versus the yen after Japan unveiled a $100 billion credit line to help companies deal with the impact of a strong currency, but shied away from intervening in the markets. Analysts say with the latest dismal U.S. economic data, markets are now pricing in expectations that Federal Reserve Chairman Ben Bernanke will use a speech on Friday (August 26) to signal a fresh monetary offensive. But UBS' Peter Hickson says the move is far from guaranteed and could disappoint markets, particularly commodities. SOUNDBITE (English) UBS' HEAD OF COMMODITY RESEARCH, PETER HICKSON, SAYING : "If it doesn't happen and if Ben Bernanke says, "no, we're going to go down a more onerous route, and that it's going to be tougher time for the U.S. Ironically, that will lead to a stronger U.S. dollar, and that won't be so good for commodities. So, there's potential disappointment coming out of this, if he doesn't come out with the right words. And of course, as you know, there's been a fair amount of opposition coming from the Republicans about QE2, QE3, and so it's a tad political." World stocks have tumbled this month on fears the United States is slipping back into recession and as Europe's sovereign debt crisis worsens. But gold rebounded Wednesday (August 24), rising about 1 percent, after suffering its biggest one-day fall in 18 months the previous day. Toshi Maeda, Reuters.