Nifty futures, Asian indices slump on Spain, China news

Hong Kong: With bad news coming in from near - and far - markets across Asia are slumping this morning.

As at 7.30 am IST, virtually all the indices across the Asia-Pacific region are in the red. Hong Kong, in particular, is taking a walloping - and is down nearly 2 percent, but the falls elsewhere are a trifle more measured. Tokyo and Sydney are down by about eight-tenths of 1 percent. Shanghai, on the other hand, is valiantly trying to stay above water.

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Nifty futures too are in retreat, down nearly seven-tenths of 1 percent, which points to a weak start to the trading day in Mumbai.

Curiously, Asian markets are out of synch with Wall Street, which had a good session overnight, with all three leading indices finishing up in excess of 1 percent. Data out of the US indicated that the housing market was perhaps bottoming out, and investors drew comfort from that. The prospect that Greece might yet cling on within the euro - going by opinion polls ahead of the upcoming elections - was also deemed positive.

But Spain’s banking troubles continue to spook markets. Overnight, the European Central Bank rejected a plan for recapitalisation of banks. Ratings agencies went into overdrive with credit downgrades. And overnight, the euro was hammered down yet again, all of which is weighing down sentiment in Asia this morning.

Hopes of a big enough stimulus in China, which too is slowing down dramatically, have been dashed. Chinese policymakers have been quoted in the local media as saying that the stimulus this time may be a mere shadow of the $630 billion package that China rolled out in response to the collapse of its economy in 2008 in the wake of the financial crisis.

Back home, some semblance of policy action is discernible, which spurred markets higher yesterday. The government has cleared a clutch of FDI investment schemes and tweaked the qualified foreign investor scheme to make it more investor-friendly. And although these are not expected to have a huge impact, they should benefit the rupee - which has been another source of concern - on the margins. There’s also chatter about the government making a renewed effort to get some of the other reform measures - including FDI in retail - going.

All these measures would normally have bucked up the market somewhat, but the sentiment in Asian markets is acting as a dampener. The rupee too will likely start a touch weaker.

Overall, brace for a weak start, and a volatile day of trading.