With stocks in Asia dropping to near their 2012 lows and investors fleeing risk assets on growing worries about Europe’s debt crisis, several market watchers say it’s time for Europe’s central bank to step up bond purchases and ease monetary policy further.
“Ultimately everything is euro-centric and the deafening silence from the European Union and the ECB has surprised me,” Patrick Perret-Green, Head of Asia Forex & Rates Strategy at Citi told CNBC. “I believe that we are at a point where they (ECB) need to be proactive rather than reactive.”
The ECBneeds to step in to buy Spanish and Italian bonds, and the European Stability Mechanism should be activated now, Perret-Green said. They should also make clear their commitment to back European banks, he added.
Investor jitters were heightened after Spain's borrowing costs shot up at a bond auction on Thursday and Moody’s cut credit ratings on 16 Spanish lenders .
Japan’s Nikkei-225 Index, South Korea’s Kospi, Taiwan’s Taiex and Australia’s S&P/ASX 200 closed down between 2.6 percent and 3.4 percent on Friday. The selling was broad-based with the Korean won weakening by one percent against the U.S. dollar at one point.
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