Enthusiasm for riskier assets such as stocks faded Monday as skeptical investors assessed a new European fiscal pact aimed at fixing the continent’s debt crisis and preventing a breakup of the euro currency bloc.
Benchmark oil dropped below $99 per barrel while the dollar rose against the euro and the yen.
European stock markets skidded in the first day of trading after the European Union adopted a new fiscal pact meant to prevent the kind of financial fiasco that is now sweeping across countries that use the euro.
Britain’s FTSE 100 fell 0.5 percent to 5,500.94. Germany’s DAX dropped 0.8 percent to 5,940.05 and France’s CAC-40 lost 0.7 percent to 3,149. Wall Street also headed for a lower opening, with Dow Jones industrial futures dipping 0.4 percent to 12,090 and S&P 500 futures down 0.5 percent at 1,247.50.
Asian stocks registered approval of the deal earlier in the day: Japan’s Nikkei 225 index jumped 1.4 percent to close at 8,653.82. South Korea’s Kospi added 1.3 percent to 1,899.76 and benchmarks in Singapore, Taiwan, Australia and Indonesia also rose.
Hong Kong’s Hang Seng swung from early gains to end trading in the red, albeit marginally, at 18,575.66. China’s Shanghai Composite Index fell 1 percent to 2,291.54 as a three-day economic conference of Chinese leaders got under way.
No major shifts in policy for 2012 are expected during a conference of Chinese leaders that began Monday. China has made headway in slowing inflation _ raising some hopes for a looser monetary policy _ while weak demand for exports from the West has sparked concerns that the economy may slow too quickly.
Under the deal, all 17 countries that use the euro agreed to allow a central European authority to oversee their future budgets and impose tighter controls on spending. They also agreed to automatic penalties if countries spend too much.
Europe’s new “fiscal compact” also calls for the launch of a permanent bailout fund for euro nations in 2012 _ a year ahead of schedule _ and an additional 200 billion euros ($267 billion) to the International Monetary Fund for a separate emergency fund for countries in crisis.
But some analysts wondered where debt-stricken Europe, which many economists say is hurtling toward recession, will find the money to make good on the pledges.
“It’s so easy for ministers to say they will contribute to this, but we’ll find out in a week or 10 days time who is,” said Andrew Sullivan, principal sales trader at Piper Jaffray in Hong Kong.
Another caveat is that the deal doesn’t help cut debt today, which in Italy, Greece and Spain has driven government borrowing costs close to levels considered unsustainable.
That loose end brought into focus the future monetary policy of the European Central Bank, and whether it would be willing to buy enough national bonds from troubled countries to keep interest rates down.
Analysts at Credit Agricole CIB said “the lack of ECB action in terms of stepping up to the plate as lender of the last resort” still weighed on investment sentiment.
There were also doubts about the willingness of each individual country to ratify the agreement.
In Tokyo, Toyota Motor Corp., Japan’s biggest car maker, fell 0.7 percent after sharply downgrading its earnings forecast for the fiscal year due to a strong yen and massive flooding in Thailand that disrupted production.
Camera and medical equipment maker Olympus Corp. surged 7.8 percent amid renewed investor faith in the embattled company. Olympus recently admitted falsifying accounting records to cover up huge investment losses from the 1990s and has vowed to investigate about 70 people, including current board members, for their possible involvement.
In Australia, energy shares led the gains. Woodside Petroleum rose 1.5 percent and mining giant BHP Billiton rose 1.9 percent.
Australian miner Whitehaven Coal Ltd. fell 1.4 percent after it agreed to a 5.1 billion Australian dollar ($5.2 billion) business combination with Aston Resources Ltd. that will create one the country’s biggest coal producers. Aston rose 1.4 percent.
High-tech shares posted strong gains. Japanese chipmaker Elpida Memory rose 4.5 percent. South Korea’s LG Electronics, which ranks No. 2 globally in flat screen televisions, also gained 4.5 percent.
Benchmark oil for January delivery was down 85 cents to $98.57 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.07 to finish at $99.41 per barrel on the Nymex on Friday.
In currencies, the euro fell to $1.3300 from $1.3370 late Friday in New York. The dollar rose to 77.66 yen from 77.54 yen.
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