Asian stocks fall in early trade; Hang Seng sheds 1.8%

By ForexMansion.com

Forexpros –

Forexpros – Asian stocks fell in Friday trade, after steep drops on global equity markets shaken by fears of worsening European debt and dimming prospects for the U.S. economy.

During early Asian trade, Hong Kong's Hang Seng Index sank 1.82% to 17,585.79, while Australia's S&P/ASX 200 dropped 1.26% to 3,915.50.

Tokyo markets were closed for the Autumnal Equinox Holiday.

Wall Street shares suffered a day of sharp sell-offs, after the U.S. Federal Reserve said that it foresaw “significant downside risks” in the U.S. economy at the conclusion of its Federal Open Market Committee's policy meeting.

The Fed's decision to launch a USD400 billion “Operation Twist”, a combination of buying and selling of short and long term Treasuries, failed to impress investors hoping for a liquidity boost to the ailing U.S. economy.

Wall Street investors reacting to the Fed's economic assessment sent stocks reeling in the Thursday session, with the Dow Jones Industrial Average dropping 3.51%, the Nasdaq Composite Index fell 3.25%, and the S&P 500 slumped 3.19%.

Meanwhile, European finance officials were reportedly planning to recapitalize 16 banks in the region deemed to be on the threshold of financial stress and in need of fresh funds immediately.

The Financial Times reported that the European Banking Authority's recent evaluation of 91 European banks, determined that 16 institutions failed its stressed economic scenario test and were advised to raise additional capital by the end of the year.

European shares plummeted in Thursday trade, with France's CAC 40 sinking 5.25% to 2,781.68, Britain's FTSE 100 sank 4.67% to 5,041.61, and Germany's DAX surrendered 4.96% to end the session at 5,164.21.

Automakers in Seoul were among declining issues on the South Korean Exchange, with Hyundai Motor Co. down sharply by 5.45% and Kia Motors Corp. falling 3.4%.

In Sydney, resource issues reflected weakness in commodity markets with BHP Billiton Ltd., the world's largest mining company, falling 2.3% and Alumina Ltd. down 0.71% in early session trade.

The outlook for European stocks was optimistic. France's CAC 40 futures was higher by 0.70% to 2,810.40, Britain's FTSE 100 futures gained 0.37% to 5,046., while Germany's DAX futures rose 0.63% to 5,209.20.

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