Asian stocks fall as European problems simmer

Asian stocks were mostly lower Monday after budget talks in the Netherlands collapsed over the weekend and a Socialist who wants to put Frances austerity plans in reverse won the first round of the countrys presidential election.Japans Nikkei 225 index swung between gains and losses before settling into negative territory, down 0.1 percent at 9,552.64.Hong Kongs Hang Seng lost 0.6 percent to 20,893.55 and mainland Chinese shares fell despite a report suggesting Chinas slowdown in manufacturing was starting to level off.South Koreas Kospi slipped 0.2 percent to 1,970.45 and Australias S&P/ASX 200 dropped 0.2 percent to 4,356.90. Benchmarks in Singapore and Taiwan were also lower.Over the weekend, Dutch lawmakers failed to resolve differences over budget cuts needed to bring the Dutch deficit back within the European Union limit of 3 percent of gross domestic product.The government is expected to resign within the coming days and call elections later this year, making it the latest European government forced out of office by the continents financial crisis.Markets were also rattled by first-round results in Frances presidential election. Socialist candidate Francois Hollande garnered more votes than incumbent conservative President Nicolas Sarkozy.Hollande wants to renegotiate a European treaty intended to limit excessive government spending in order to emphasize growth over austerity.If Hollande wins a second-round election May 6, economists fear those steps would upset Frances delicate cooperation with Germany that has been key to Europes efforts to resolve its financial crisis.A report on Chinese manufacturing suggested that a slowdown in growth may have bottomed out in the first quarter. HSBCs China purchasing managers index aseasonally adjusted index designed to measure the performance of the manufacturing economy rose to 49.1 in April, up from 48.3 in March.Still, any reading below 50 indicates a drop in production. The semi-soft result kept traders hopes high for monetary easing by China to prop up growth. One possible option would be for the Chinese central bank to lower the ratio of reserves that banks are required to hold, a move that could boost lending.There is no reason to aggressively ease policy, but at the same time, it seems momentum is weaker and some fine-tuning would be useful, said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong.I think we have to wait for whether China eases policy in the near term. That will be the key determinant of market sentiment, so lets hope they do.U.S. stocks rose Friday on the back of stronger profits from Microsoft, McDonalds and other major U.S. corporations.The Dow Jones industrial average rose 0.5 percent to close at 13,029.26. The Standard & Poors 500 index rose 0.1 percent to 1,378.53. The Nasdaq composite index fell 0.2 percent to 3,000.45.In energy trading, benchmark oil for June delivery was down 6 cents to $103.82 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.16 to settle at $103.88 in New York on Friday.The euro fell to $1.3195 from $1.3215 late Friday in New York. The dollar fell to 81.27 yen from 81.58 yen.