Asia Stocks Down After Obama's Tough Talk On Iran

By Salon Staff

Published March 5, 2012 4:54AM (EST)

BANGKOK (AP) — Asian stock markets fell Monday as tough talk by President Barack Obama over Iran's nuclear program and uncertainty over Greece's ability to clear the next hurdle in its debt reduction plan unnerved investors.

Benchmark oil rose to near $107 per barrel while the dollar gained against the euro but fell against the yen.

Japan's Nikkei 225 index fell 0.5 percent to 9,731.82 and South Korea's Kospi dropped 1 percent to 2,014.16. Hong Kong's Hang Seng lost 1.1 percent to 21,319.32 and Australia's S&P/ASX 200 shed 0.4 percent to 4,254.90.

In a speech Sunday, President Barack Obama said he would not hesitate to attack Iran to keep it from getting a nuclear bomb, hoping to dissuade Israel from launching a unilateral strike that could ignite a Middle East war.

But he also pleaded for time for diplomacy to work, stressing that military force was a last resort, not the next option at a time when sanctions are squeezing Iran.

Still, markets reacted nervously to the message that force remains an option.

"Markets are likely to begin the week in cautious mood on the back of US President Obama's tough speech on Iran nuclear problem," analysts at Credit Agricole CIB in Hong Kong said in an email.

Uncertainly over a definitive solution to Greece's long-standing debt crisis also kept investors at bay.

The Greek Finance Ministry says the country's debt-reducing bond swap with private creditors is expected to take place on March 12. At least 66 percent of private sector bondholders must be willing to participate in the deal, the minimum number to make the deal viable.

Athens last week took the first concrete steps toward making sure that a small number of holdouts cannot scupper the deal. The Greek parliament is expected to introduce so-called collective action clauses, which would force holdouts to participate in the bond swap as long as a majority of investors approve.

Other headwinds in Europe stem from Spain, whose prime minister said Friday that the country will miss its deficit goal for this year, risking sanctions from the European Union. The announcement came as the government reported a big rise in claims for jobless benefits and a forecast that economic output will fall this year.

Louis Wong, director of Phillip Securities Ltd. in Hong Kong, said markets were in a holding pattern head of the release of U.S. jobs data for February on Friday and a meeting Thursday of the European Central Bank, which is under pressure to reduce interest rates to help a waning eurozone economy.

"The market is taking a pause after the recent rally," Wong said. "Various central banks are having their interest rate meetings this week, and also the U.S. will release a batch of economic data."

On Wall Street on Friday both the Dow and Nasdaq retreated from highs hit earlier in the week.

The Dow Jones industrial average fell marginally to close at 12,977.57. The Standard & Poor's 500 index shed 0.3 percent to close at 1,369.63. The Nasdaq composite average eased 0.4 percent to 2,976.19.

Benchmark oil was up 24 cents to $106.94 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.14 to finish at $106.70 per barrel on Friday.

In currencies, the euro fell to $1.3199 from $1.3204 late Friday in New York. The dollar fell to 81.61 yen from 81.81 yen.

Salon Staff

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