Asian markets struggle ahead of Fed


The yen dealt Tokyo's car-company stocks a knock on Tuesday, as it showed sudden strength

HONG KONG, China -- Asian markets struggled on Tuesday, with renewed fears over how far the economic recovery will go.

The Nikkei index fell 2.03 percent to 11,316.04 as investors sold down tech shares and big exporters.

The broad Topix index fell 1.14 percent to 1,074.12, reflecting a bias in selling toward tech shares, a bigger influence on the Nikkei.

But outside Japan, many markets surged back from morning weakness to post gains for the day. What losses remained were modest.

Japanese markets were back in action after the Golden Week spring vacation last week and a day off on Monday to honor Children's Day over the weekend.

The yen was the focus of bureaucratic attention, with ministers saying they weren't intervening to stem its recent run of strength against the U.S. dollar.

Surge more U.S. oriented

They attribute the currency's surge, which saw it touch 126.79 to the dollar in European trade as markets opened there on Tuesday, to fretting over the U.S. economy rather than a surge in buying of the yen (full story).


The countdown is on to the World Cup in South Korea and Japan, but investors will be watching the Fed

The U.S. Federal Reserve Bank's policy board meets later Tuesday to discuss interest rates. They are not expected to raise rates but investors will be watching for a sense of the Fed's take on the U.S. recovery, which now looks less convincing.

In Tokyo, Nasdaq's overnight 2.14 percent fall hurt large technology issues. The Dow was off almost 2 percent.

Japan's largest cell phone company, NTT DoCoMo, dropped 2.75 percent to 318,000 yen.

The yen's run has taken it to auto stocks, some of Japan's largest exporters. Toyota fell, with the yen eating into future profits when the car company sends its overseas profits back to Japan.

Embattled dairy producer Snow Brand Milk crashed 16.7 percent to 125 yen, on a report that it will slash its capital.

Korea surprises with rate rise

Outside Japan, losses were mild, with South Korea staging a late-day comeback. The benchmark Kospi ended 0.06 percent lower at 826.34.


Creditors are still trying to make sense of what to do with Hynix Semiconductor, at a new record low close

With most of Asia in recession, investors are worrying that the Korean market may overheat. The central Bank of Korea surprised analysts on Tuesday with an interest-rate rise (full story).

Hynix Semiconductor hit another unprecedented low close, down 12.0 percent to 620 won. The government still says the company may talk with other investors.

Larger rival Samsung Electronics fell 3 percent to 337,500 won.

Taiwan opened lower but rallied through the day to post a gain. Hong Kong did the same.

Taipei's Taiex rose 0.38 percent to 5,663.98, coming off two-month lows. The electronics subindex rose 1.3 percent. It got a boost from positive comments by Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co.

TSMC climbed 1.2 percent to T$82.00 after Chang said its health, potential and outlook are brighter.

Australia suffers Coles, News

In Australia, the S&P/ASX 200 index fell 0.61 percent to 3,325.0. Coles Myer took another hit after warning on earnings on Monday.

Australia's largest retailer fell 4.2 percent to A$6.20 after a 16.6 percent fall the day before.

News Corp. again suffered ahead of reports it will post a $5 billion writedown with its earnings next week. It fell 0.3 percent to A$11.68.

Mining stocks gave back some of Monday's strength, with BHP Billiton down 2.3 percent at A$10.87.

New Zealand's Top 40 fell 0.29 percent to 2,052.16. But market No. 1 Telecom NZ climbed a cent to NZ$4.82.

Hong Kong's Hang Seng index closed 0.51 percent higher at 11,795.98. Investors showed renewed interest in Asia's worst performer of 2001. But the market was held back by oil producer CNOOC, down 3.7 percent at HK$10.35.

Singapore opened lower but the Straits Times index was up 0.33 percent at 1,727.69 near the close.

Indian shares are showing strength, the main Mumbai index gaining 0.79 percent to 3,410.98 in afternoon trade.

Reuters contributed to this report.