Asian equity markets ended mostly lower Monday in quiet trading after a U.S. holiday Friday, with some caution creeping in as the U.S. corporate earnings season drew closer.
Indian stocks were hammered in the afternoon as investors expressed disappointment after Finance Minister Pranab Mukherjee presented an expansionary budget that was projected to further stretch the country's fiscal deficit.
The Sensex staged a sharp retreat from early gains after Mr. Mukherjee proposed a major rural spending thrust that he said would widen the federal government's fiscal deficit to a wider-than-expected 6.8% of gross domestic product. The 30-stock benchmark index ended down 5.8% at 14043.40.
"It's a big letdown. Markets were expecting that there would be a roadmap for bringing down the fiscal deficit gradually, details of disinvestment and deregulation of oil prices," said Vinod K. Sharma, director for research at Anagram Securities. "There's nothing for investors to look forward to in this budget."
Financials suffered sharp declines, ICICI Bank tumbling 10.1%, while mortgage financier Housing Development Finance Corp. shed 9%.
Oil, mining and shipping stocks paced losses elsewhere in the region in the wake of sharp declines in commodity prices.
But South Korean shares were lifted by Samsung Electronics after the electronics manufacturer made some reassuring comments on its second quarter performance.
Japan's Nikkei 225 slid 1.4% to 9680.87 and Hong Kong's Hang Seng Index gave up 1.2% to 17979.41.
China's Shanghai Composite advanced 1.2% to stretch its winning-run to a fourth straight session, South Korea's Kospi rose 0.6%, Australia's S&P/ASX 200 lost 1.2%, Taiwan's Taiex slipped 0.2%, New Zealand's NZX 50 slid 0.7% and Singapore's Straits Times shrank 1.5%.
"Sentiment isn't great at the moment. The market may have run a bit hard in the second quarter. This is just a retracement and not unexpected," said Macquarie Private Wealth senior private client adviser Marcus Droga.
Front-month Nymex crude-oil futures, meanwhile, dropped $2.72 to $64.01 a barrel, while spot gold prices lost $6.30 to $925.50 a troy ounce.
Oil, shipping and steel stocks retreated for another session. "The market is now aware that its economic recovery expectations had been too high," said Yumi Nishimura, a market analyst at Daiwa Securities SMBC.
Inpex Corp. lost 3% and Nippon Yusen K.K. dropped 3.4% in Tokyo, BHP Billiton shed 2.4% and Santos gave up 4% in Sydney, and Cnooc and PetroChina Co. both shrank 2.2% in Hong Kong.
Rio Tinto shares also fell 2.2% in Sydney, after the Anglo-Australian miner said it would sell its Alcan Packaging Food Americas division to Bemis Co. for $1.2 billion.
Adding to the gloom, Dow Jones Industrial Average futures were lower before the opening bell. The U.S. earnings season kicks off on Tuesday, with Alcoa reporting its second-quarter results.
"Some of our clients have become a bit more risk-adverse in recent days. They have either been selling or not buying," said ABN Amro head of Asia research Daphne Roth in Singapore.
Blue-chip exporter stocks were lower in Tokyo on the yen's strength, with Sony off 1.2% and Honda Motor down 1.5%.
Samsung Electronics jumped 5.5% in Seoul. The world's biggest memory-chip maker by revenue said it expected second-quarter sales to come in higher than a year earlier, while its operating profit was expected to be between 2.2 trillion Korean won and 2.6 trillion won.
Samsung Engineering added 1.8% on news it had signed a $2.6 billion, three-year contract with Algerian state-owned Sonatrach to modernize an oil refinery.
Chinese property stocks added to their recent gains amid reports on an improving demand outlook, with China Vanke Co. shares rising 1.2% in Shenzhen, while China Resources Land rose 1.5% and Guangzhou R&F Properties Co. added 1.1% in Hong Kong.
Taiwan construction stocks were supported by a report in the Commercial Times the government would speed up its urban renewal plans. Founding Construction & Development rose by its daily 7% limit.
Malaysian shares lost 0.6%, with Indonesian shares off 1.9% and Philippine shares up 0.7%.
Trading was choppy in the currency markets after the U.S. holiday, with the Japanese yen making some gains as regional stock markets fell.
The euro was at $1.3901, from $1.3985 late in North America on Friday, and at ¥132.49, from ¥134.25. The U.S. dollar was at ¥95.29, from ¥95.99.
Traders were looking ahead to the week's meeting in Italy of the Group of Eight leading nations and for any further discussion on the U.S. dollar's status as the main global reserve currency.
Analysts at Calyon said "we doubt the G8 meeting will conclude with anything that is destabilizing to the U.S. dollar over the short term, even if the longer term role of the dollar is at risk. We look for the dollar to maintain a firmer bias in a generally lethargic market environment this week."
Brown Brothers Harriman added "the bottom line is a new international reserve currency cannot be artificially created overnight, or even in a decade."
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