Barefoot Investor: Asia Stocks Drop, Euro Weakens Before Crisis Meeting

Asia stocks dropped, the euro fell to an eight-month low versus the dollar and bond risk jumped as data signaled global economic growth is slowing and European officials prepared to weigh the risk of a Greek default.

The MSCI Asia Pacific Index tumbled 3.1 percent at 12:34 p.m. in Tokyo, after slumping last quarter by the most since 2008. Standard & Poor’s 500 Index futures declined 0.6 percent. The euro slid 0.4 percent to $1.3329, the Malaysian ringgit sank to a 14-month low and Taiwan’s dollar weakened for a third day. Oil dipped 1.4 percent in New York and copper fell for a fourth day. The Markit iTraxx Asia index of default risk headed for its highest close since May 2009.

European finance ministers meeting in Luxembourg today will grapple with how to shield banks from the debt crisis and mull a further boost to the region’s rescue fund. The Greek government said yesterday it approved 6.6 billion euros ($8.8 billion) of austerity measures. U.S. factories grew last month at the slowest pace since July 2009, a report today may show, while the Tankan survey showed sentiment among Japan’s largest manufacturers remains worse than before the March earthquake.

“We might face more risks, particularly in a market that hasn’t had enough of a correction,” said Diane Lin, a fund manager with Sydney-based Pengana Capital Ltd., which manages about $1.1 billion in global assets. “The U.S. is not falling into recession, and we haven’t seen enough evidence yet, but it’s definitely slowing down.”

Almost 13 shares fell for every one that gained on MSCI’s Asia Pacific Index, which declined 16 percent in the three months ended Sept. 30. The gauge has fallen every quarter this year and is down 20 percent in 2011.
Asian Stocks Drop

Japan’s Nikkei 225 Stock Average slipped 2.5 percent, Australia’s S&P/ASX 200 Index lost 2.4 percent and Hong Kong’s Hang Seng Index sank 4.4 percent. Financial markets in China and South Korea are closed for holidays today.

Mitsui OSK Lines Ltd. dropped 7 percent after Japan’s second-biggest shipping line by sales reported a net loss for the six months ended September. The quarterly Tankan index of sentiment at large manufacturers rose to 2 in September from minus 9 in June, the Bank of Japan said in Tokyo today. The reading was below the reading of 6 in March and in line with the median estimate of 23 economists surveyed by Bloomberg News.

The benchmark U.S. stocks gauge sank 2.5 percent on Sept. 30, rounding off a 14 percent quarterly loss that was the biggest since the three months to December 2008. The MSCI All- Country World Index tumbled 18 percent last quarter amid signs of faltering U.S. growth.

U.S. Factories

The U.S. Institute for Supply Management’s factory index probably fell to 50.3 from 50.6 in August, according to a Bloomberg survey of economists ahead of data today. A reading of 50 is the dividing line between contraction and expansion. The yield on 10-year Treasuries was little changed at 1.91 percent.

The euro earlier fell to $1.3322, its weakest since Jan. 18. The 17-nation currency traded at 102.64 yen from 103.12 yen on Sept. 30, when it lost 1.3 percent.

Europe’s “crisis will probably be stretched for many, many months,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “A crisis prolonged means the euro will keep sliding.”

Today was the original target for approving an 8 billion euro ($11 billion) loan payment to Greece, the sixth installment of a 110 billion-euro lifeline put together in May 2010. That decision has been pushed back until mid-October as Greece seeks to repair its finances. The new measures will help cut the deficit to 6.8 percent of gross domestic product from 8.5 percent this year, the finance ministry said last night.
Ringgit, Taiwan Dollar

“Risk aversion is back in play,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ in Kuala Lumpur. “Lingering concerns over Europe’s debt crisis will continue to weigh on emerging-market assets.”

The Dollar Index, which tracks the U.S. currency against those of six trading peers, rose 0.6 percent, a fourth day of gains. Malaysia’s ringgit dropped as much as 0.8 percent to 3.22 versus the dollar, the weakest level since July 2010, and Taiwan’s currency declined as much as 0.5 percent to NT$30.672.

The cost of insuring corporate and sovereign bonds in Asia against non-payment rose, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increasing 15 basis points to 259.5 basis points, Royal Bank of Scotland Group Plc prices show.

The risk benchmark is headed for its highest close since May 4, 2009, according to data provider CMA, which is owned by CME Group Inc., and compiles prices quoted by dealers in the privately negotiated market.
Oil, Copper

Crude for November delivery fell as much as 1.6 percent to $77.90 a barrel in electronic trading on the New York Mercantile Exchange before trading at $78.72. OPEC production last month climbed to the highest since November 2008 as Iraqi and Libyan gains outpaced a Saudi cut, a Bloomberg News survey showed.

Royal Dutch Shell Plc shut crude-processing units at its biggest refinery after a fire last week at the Singapore site. The company declared force majeure, a legal clause exempting it from fulfilling contracts.

Three-month copper tumbled 2.5 percent to $6,843 a metric ton on the London Metal Exchange, headed for the lowest close since July 2010. Futures dropped 26 percent last quarter. December-delivery corn retreated 1.8 percent to $5.82 a bushel. Prices have slumped 6.8 percent this year. (Bloomberg)


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