GLOBAL MARKETS-SARS hits Asian stocks, dollar stuck near lows 15:23, Wednesday, 17 December 2003
By Anne Marie Roantree
SINGAPORE, Dec 17 (Reuters) - A SARS case in Taiwan rattled Asian investors on Wednesday, while the dollar hovered near record lows on the euro after surprisingly subdued U.S. inflation data indicated interest rates would stay low for some time.
The dollar's weak tone pushed gold higher and saw Japanese stocks drop two percent, despite broadly robust U.S. economic data that helped send Wall Street to its highest close in nearly 19 months.
Taiwan said a SARS researcher at a military hospital had tested positive for the deadly virus and had recently visited Singapore, sending Taiwan shares <.TWII> down two percent and Singapore Airlines down more than 2.5 percent. Hong Kong's Cathay Pacific <0293.HK> dropped 2.7 percent.
"The news renewed fears of the previous SARS virus outbreak, which dampened Taiwan's economy," said Maggie Chien, asset management consultant at Capital Investment Management.
Japan's Nikkei <.N225> was down two percent at 10,063.02 at 0400 GMT, as the yen, which is up more than 10 percent against the dollar this year, weighed on exporters.
Toyota Motor Co <7203.T> fell two percent, while Canon Inc <7751.T> dropped more than two percent.
"The two biggest factors for the dollar's decline in recent months have been the U.S. current account deficit and the prospect of low interest rates," said Kikuko Takeda, market economist at Bank of Tokyo-Mitsubishi. "Yesterday's data confirmed that these will continue, giving a green light for dollar selling for the time being."
Shares in South Korea <.KS11> fell 1.1 percent, while Hong Kong <.HSI> was down 0.5 percent. An MSCI index of Asia Pacific shares outside Japan <.MSCIAPJ> was down 0.7 percent, off a three-year high hit on Monday.
DOLLAR FALTERS
U.S. data on Tuesday showed consumer prices dropped 0.2 percent in November, after remaining unchanged in October, dragging the underlying inflation rate to its lowest in nearly 38 years.
The third-quarter current account deficit shrank more than expected but was still running at about five percent of the country's gross domestic product, a level many analysts deem as unhealthy.
Robust industrial production and housing starts data suggested the U.S. economy was stronger than most analysts had thought, but the dollar again failed to take advantage.
As of 0400 GMT, the dollar, which has been weighed down by the ballooning current account deficit and security fears in Iraq, stood at 107.50 yen , little changed from late U.S. levels and off a three-year low of 106.74 yen hit last week.
Few players were eager to buy the yen amid fears Japan would intervene to protect an export-driven economic recovery.
The euro hovered around $1.2324 , little changed from late U.S. levels. It was about 0.3 percent below its record high of $1.2363 set in London trade on Tuesday.
The strong industrial and house building figures helped the Dow Jones Industrial Average <.DJI> rise one percent to its highest close since May 2002. The tech-heavy Nasdaq <.IXIC> rose 0.3 percent.
U.S. Treasuries firmed in U.S. trade as the drop in the CPI trumped the other economic reports to suggest interest rates would remain low. The benchmark 10-year note yielded 4.20 percent in Asian trade.
U.S. oil was up one cent at $32.90, after slipping in New York as investors took profits.
Gold was quoted at $409.00 an ounce, compared with $407.25 in New York.