Asia Stocks Continue Slide on Weak U.S. Data

Asian stock markets fell for a third day Thursday after signs of weakness in the U.S. housing market added to fears about the health of the global economic recovery. European shares were mixed.

Hong Kong, Shanghai, Sydney and Taiwan all declined 2 percent or more after a U.S. government report showed new home sales fell unexpectedly in September for the first time since March. That fueled fears the housing rebound was driven solely by government policies that are being withdrawn before the private sector recovers.

“This really increased nervousness about the health of the global recovery and market valuations,” said Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong.

Markets got little reassurance from an International Monetary Fund report that raised Asian growth forecasts for this year and next.

Tokyo’s Nikkei 225 index dropped 183.95 points, or 1.8 percent, to 9,891.10 while China’s benchmark Shanghai Composite Index shed 2.3 percent to 2,960.47.

Taiwan’s Taiex and Sydney’s S&P/ASX 200 suffered the region’s biggest declines, both falling 2.4 percent. Hong Kong’s Hang Seng was down 496.59, or 2.3 percent, to 21,264.99.

As trading got underway in Europe, France’s CAC-40 was up 0.1 percent but Britain’s FTSE 100 and Germany’s DAX were both off 0.1 percent.

Adding to investor nervousness was Norway’s decision Wednesday to become the first European country to raise interest rates since the crisis began, Kowalczyk said. He said that prompted worries governments might be withdrawing stimulus measures before private sector activity has fully recovered.

“Concerns are that if this support wanes or is withdrawn and the private sector is unable to replace government monetary actions, there could be another economic slump,” Kowalczyk said.

Elsewhere in Asia, South Korea’s Kospi fell 1.5 percent and Singapore’s Straits Times Index dropped 0.7 percent.

Wall Street was hit Wednesday by a government report that showed September sales of new homes falling by a 3.6 percent seasonally adjusted annual rate of 402,000. Economists had expected 440,000.

The Dow fell 119.48, or 1.2 percent, to 9,762.69. The index is down in five of the past seven days.

The Standard & Poor’s 500 index slid 20.78, or 2 percent, to 1,042.63. The Nasdaq dropped 56.48, or 2.7 percent, to 2,059.61. Stock futures pointed to modest gains Thursday on Wall Street. Dow futures were up 39, or 0.4 percent, at 9,750.

Also Wednesday, Goldman Sachs Group Inc. cut its forecast of U.S. economic output in the July-September quarter from an annual rate of 3 percent to 2.7 percent. The government is due to report quarterly growth Thursday, and economists are looking for growth at an annual rate of 3.3 percent after a record four straight quarters of contraction.

Oil prices hung below $78 a barrel in Asia as an unexpected jump in U.S. gasoline supplies cast doubt on the strength of a recovery in crude demand.

Benchmark crude for December delivery was up 10 cents to $77.54 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.09 to settle at $77.46 on Wednesday.

In currencies, the dollar rose to 90.68 yen from 90.64 yen. The euro rose to $1.4743 from $1.4714.

10/29/2009 5:00 AM JOE McDONALD, AP Business Writer BEIJING