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Thursday, August 18, 2011 11:52 PM

Asia Stocks Lower Following Europe, US Bloodbath; Asia Pacific Index Erases All Gains Since January 2010

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Amid heightened volatility in both directions with top-to-bottom swings of 8% or more on some days, Asia Pacific shares are only "modestly" lower tonight (Friday Morning in Asia) following a veritable bloodbath in Europe and the US on Thursday.

Europe 2011-08-18 Close

Asia Pacific 2011-08-19 Mid-Session

Charts courtesy of Yahoo!Finance Major World Indices.

Asia Pacific Index Erases All Gains Since January 2010

Bloomberg reports Asian Stocks Set to Erase 2010’s Gains as World Economy Concern Deepening

Asian stocks fell, with the regional index revisiting levels from last week’s global stock rout, amid signs the world economy is slowing and Europe’s debt crisis will damage the banking system. South Korea’s Kospi Index was set to drop the most since November 2009.

The MSCI Asia Pacific Index fell 2.4 percent to 120.17 as of 11:23 a.m. in Tokyo, set to erase all its gains since the start of 2010. The gauge is also headed for a fourth straight week of loss. About 20 stocks dropped for each that advanced on the index today. The Kospi Index (KOSPI) sank 4.4 percent, headed for its biggest slump since Nov. 27, 2009.

The MSCI Asia Pacific Index lost 11 percent this year through yesterday, compared with drops of 9.3 percent by the S&P 500 and 18 percent by the Stoxx Europe 600 Index.

Futures on the Standard & Poor’s 500 Index slid 0.9 percent today. In New York, the index tumbled 4.5 percent yesterday on concern the global economy is slowing and speculation that European banks lack enough capital. The Stoxx Europe 600 Index plunged 4.8 percent in London yesterday, the biggest drop since March 2009.

“We have a fear-based, emotional-based market right now,” Erik Ogard, director of multi-strategy investments at Russell Investments, which oversees $163.4 billion, said in an interview with Susan Li on Bloomberg Television’s “First Up.” “There are real economic things to be worried about, however it’s the degree of the reaction that we think might just be a little overdone.”
The Bloomberg article is from Japan, written on the 19th. That will explain the term "yesterday" in the second to last paragraph in the above blockquote.

Note that nearly everyone thinks the reaction is "overdone". They simply do not understand debt-deflation and how little the Fed can do about it.

Mike "Mish" Shedlock
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