Forex Markets Shrug Off Disappointing Eurozone Meet

The euro recovered from an early wobble in Asian trade Wednesday as forex markets shrugged off a Eurozone meeting that failed to land a killer blow in the battle to restore debt confidence.

Shares were mixed, with local concerns largely trumping global uncertainties in Sydney and Seoul, while Tokyo kept its eyes on the main world news.

Asia's biggest bourse closed down 0.55 percent, or 50.17 points, at 9,057.26. Sydney added 1.32 percent, or 56.6 points, to 4,303.9 with confidence high on corporate earnings coming in mostly in line with expectations.

Seoul built on its thumping near-five percent gains of Tuesday, up 0.68 percent, or 12.80 points, to 1,892.67.

Hong Kong was a healthy 1.19 percent to the good in the afternoon, but Shanghai dropped 0.22 percent.

"Concerns about a slowdown in both Europe and in the United States continue to be at the core of investors' minds," Yutaka Miura, a senior technical analyst at Mizuho Securities, told Dow Jones Newswires.

Wall Street closed down overnight as the Dow Jones Industrial Average ended its three-day rally, dropping 76.97 points (0.67 percent) to finish at 11,405.93.

French President Nicolas Sarkozy and German Chancellor Angela Merkel vowed late Tuesday to give the Eurozone bloc a "true economic government", but experts said their pledges were not enough to defuse the region's debt crisis.

Speaking after the talks in Paris, the leaders said they would propose an EU-wide tax on financial transactions and seek to create a Eurozone governing body headed by European Union president Herman van Rompuy.

But the pair disappointed many by not backing the idea of issuing "Eurobonds" to pool the debts of the 17 Eurozone members, and by insisting the bloc's existing 440-billion-euro ($634 billion) bailout fund was "sufficient".

Instead, the leaders said member states would be held to a tougher fiscal standard and new cross-border controls put in place.

"This will inevitably raise the appeal of safe-haven currencies like the Japanese yen and Swiss franc," Kuroiwa said.

The Swiss unit eased in afternoon trade, moving to 1.1522 per euro from 1.1434 in New York and 0.7998 francs per dollar against 0.7935.

The dollar changed hands at 76.68 yen early Wednesday against 76.75 yen in New York and 76.74 yen in Tokyo Tuesday.

"The French-German meeting did not provide any clear solutions, and this has incited more euro selling," said Nobuyoshi Kuroiwa, senior deputy general manager at Hachijuni Bank's forex team in Tokyo.

The single currency initially dipped to $1.4352 in early Tokyo trade, compared with $1.4406 in New York overnight, before rebounding to $1.4405 in the afternoon.

The euro fetched 110.49 yen against 110.67 yen in New York late Tuesday and 110.41 yen in Tokyo the previous day.

Apart from the Eurozone summit, U.S. investors were also disappointed by the news that Germany saw only 0.1 percent growth in the second quarter and the Eurozone’s output expanded a meagre 0.2 percent.

Analysts said governments were now in the worst of both worlds, trying to cut debt by slashing spending and raising taxes, a double squeeze that kills growth and further complicates efforts to stabilize public finances.

European markets closed prior to the end of the Sarkozy-Merkel summit. London and Zurich were the only majors to finish in positive territory Tuesday.

Gold opened in Hong Kong at $1,785.00-$1,786.00 an ounce, up on its Tuesday close of $1,779.50-$1,780.50.

Oil was higher, but traders said sentiment was subdued after the disappointing eurozone meet.

New York's main contract, West Texas Intermediate light sweet crude for September delivery, was up 70 cents to $87.35 a barrel, while Brent North Sea crude for October rose 45 cents to $109.58.

In other markets:

-- Manila closed 0.68 percent, or 32.43 points, lower at 4,340.27.

Top-traded "A" shares of Lepanto Consolidated Mining fell 4.0 percent to 1.44 pesos, while Energy Development ended 1.50 percent down to 5.91 pesos.

Philippine Long Distance Telephone inched up 0.35 percent to 2,308 pesos.

-- Wellington closed up 0.50 percent, or 16.36 points, at 3,290.10 on robust domestic company results.

Fletcher Building, which announced a 4.0 percent rise in annual net profit, gained 1.7 percent to NZ$7.86, Telecom Corp. lifted 1.0 percent to NZ$2.65 and Air New Zealand was up 0.9 percent to NZ$1.11.

-- Taiwan lost 0.73 percent, or 56.83 points, to 7,741.76.

TSMC shed 0.3 percent at Tw$65.8 while Hon Hai was 0.13 percent lower to Tw$74.1.