Fears of steep losses at corporate bellwethers from Citigroup to Sony hit Asian shares on Tuesday, signaling the extent of the global economic slowdown and bolstering less risky assets such as government debt, reported Reuters.
The euro slumped to a one-month low against the dollar and the yen as the European Central Bank looks set to cut interest rates this week in response to slowing growth, while oil continued a slump on fears about reduced energy demand.
Still, losses in Asian shares were not as steep as in previous days, and the Export-Import Bank of Korea sold $2 billion in five-year dollar bonds, indicating demand for new issuance in regional credit markets, albeit at a premium.
"Earnings and economic disappointments are the main contributors to the rise in risk aversion, both of which are likely to act as a persistent drag on markets over coming weeks," Calyon analysts said in a note to clients on Tuesday.
European shares were seen edging lower as well.
The MSCI index of Asia-Pacific stocks outside Japan fell 0.7 percent as of 0700 GMT (2 a.m. EST), marking its fifth consecutive losing session.
After starting the year with gains, the MSCI indicator is now down more than 3 percent so far in 2009, dashing initial hopes for a revival in the willingness to add risk.
Concerns over big quarterly losses are now keeping investors on edge. Citigroup (C.N) could record a fourth-quarter operating loss of over $10 billion, the Wall Street Journal reported on Monday, while U.S. aluminum producer Alcoa (AA.N) announced a fourth-quarter loss.
Asia's export companies are also hurting as major overseas markets such as the United States are mired in recession.
Sony Corp (6758.T) may post an operating loss of about $1.1 billion this financial year, its first loss in 14 years, while Toshiba Corp (6502.T) expects a loss of about $2.2 billion according to Japanese media reports, sending shares in each down more than 8 percent.
Japanese exporters are being squeezed not only by slower global demand but also the surging yen. The Nikkei .N225 fell 4.8 percent, after being closed on Monday for a public holiday.
Meanwhile, weak economic data continues to whipsaw investors. China's exports and imports fell in December for the second month in a row, data on Tuesday showed.
Shanghai's main index .SSEC fell 2 percent and Hong Kong .HSI fell 1.5 percent. Shares in Australia .AXJO lost 0.8 percent.
But shares in Taiwan and India .BSESN rose more than 1 percent each, while indexes in South Korea and Singapore .FTSTI also advanced.
