Barefoot Investor: Asian Stocks Swing Between Gains, Losses on Moody’s Review of U.S. Credit

Asian stocks swung between gains and losses after Moody’s Investors Service put the U.S. under review for a credit-rating downgrade, hurting the outlook for exporters. Commodity producers climbed after prices advanced yesterday.

Toyota Motor Corp., the world’s biggest carmaker by market value, dropped 0.9 percent in Tokyo as the yen advanced against the dollar for a fifth day. Sony Corp., which gets about a quarter of its revenue from the U.S., lost 0.9 percent. David Jones Ltd. (DJS), Australia’s second-biggest department-store chain by sales, tumbled 16 percent in Sydney after cutting its profit and sales forecasts. Korea Zinc Co. surged 4.8 percent in Seoul as metal prices rose after the U.S. Federal Reserve signaled it may add more stimulus to prevent economic growth stalling.

“Moody’s action is a shot over the bows in terms of telling U.S. politicians that failure to reach agreement on the debt ceiling would have dire consequences for the economy,” said Tim Schroeders, who helps manage $1 billion in global equities at Pengana Capital Ltd. in Melbourne. “Meanwhile, the Fed is saying growth is patchy and may require stimulus and that they’re prepared to step in to provide it as required, which has to be seen as positive.”

The MSCI Asia Pacific Index was little changed at 136.02 as of 11:59 a.m. in Tokyo. Almost five stocks declined for every three that advanced. The gauge last week extended its rally for a third week as European Union leaders hammered out proposals to roll over debt to prevent Greece from defaulting and after reports showed retail sales in the U.S. increased in June and China’s latest interest rate increase sparked speculation a tightening cycle may soon end.

Faster Pace

Japan’s Nikkei 225 (NKY) Stock Average lost 0.4 percent today. South Korea’s Kospi Index sank 0.5 percent and Australia’s S&P/ASX 200 Index fell 0.5 percent. New Zealand’s NZX 50 Index slid 0.5 percent, even as a report showed the economy expanded at a faster pace, signaling the nation is recovering from its deadliest quake in 80 years.

Futures on the Standard & Poor’s 500 Index slid 0.2 percent today. In New York, the index pared gains to 0.3 percent from as much as 1.4 percent yesterday.
Moody’s Investors Service put the U.S., rated Aaa since 1917, under review for a credit-rating downgrade for the first time since 1995 on concern the government’s $14.3 trillion debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low. The rating would likely be reduced to the Aa range and there is no assurance that Moody’s would return its top rating even if a default is quickly cured.(Bloomberg)


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